Note 1 – Financial Statement Presentation and Significant Accounting Policies

Basis of Financial Presentation.The consolidated financial statements include the accounts of Quaint Oak Bancorp, Inc., a Pennsylvania chartered corporation (the ~~"Company"~~“Company” or ~~"Quaint~~“Quaint Oak ~~Bancorp"~~Bancorp”) and its wholly owned subsidiary, Quaint Oak Bank, a Pennsylvania chartered stock savings bank (the Bank”), along with its wholly owned subsidiaries. At June 30, ~~2021,~~2022, the Bank has ~~five~~six wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, ~~and~~ Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, each a Pennsylvania limited liability company. The mortgage company offers mortgage banking primarily in the Lehigh Valley, Delaware Valley and Philadelphia County regions of Pennsylvania. The real estate and abstract companies offer real estate sales and title abstract services, respectively, primarily in the Lehigh Valley region of Pennsylvania. These companies began operation in July 2009. In February, 2019, Quaint Oak Mortgage opened a mortgage banking office in Philadelphia, Pennsylvania. QOB Properties, LLC began operations in July 2012 and holds Bank properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. Quaint Oak Insurance Agency, LLC began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. InOakmont Commercial, LLC was formed in ~~February 2020,~~October 2021 and operates as a multi-state specialty commercial real estate financing company. On April 29, 2022, Oakmont Commercial, LLC, a wholly owned subsidiary of Quaint Oak Bank, ~~opened~~purchased all the stock of KCMI Capital, Inc., a ~~full-service retail banking office in Philadelphia, Pennsylvania.~~Pennsylvania corporation and subsidiary of Wilmington Savings Fund Society, FSB. The purchase price for the shares totaled approximately $55.5 million, which represented the unpaid principal balance of the loan portfolio, the primary asset of KCMI Capital, Inc. As of January 4, 2021, the Bank holds a majority equity position in Oakmont Capital Holdings, LLC, a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. All significant intercompany balances and transactions have been eliminated.

The Bank is subject to regulation by the Pennsylvania Department of Banking and Securities and the Federal Deposit Insurance Corporation. Pursuant to the Bank’s election under Section 10(l) of the Home Owners’ Loan Act, the Company is a savings and loan holding company regulated by the Board of Governors of the Federal Reserve System. The market area served by the Bank is principally Bucks, Montgomery and Philadelphia Counties and the Lehigh Valley area in Pennsylvania. The Bank has three banking locations: the main office location in Southampton, Pennsylvania and regional banking offices in the Lehigh Valley and Philadelphia. The Bank also has a mortgage office in Philadelphia and an insurance agency office in New Britain Township, Pennsylvania. The principal deposit products offered by the Bank are certificates of deposit, money market accounts, non-interest bearing checking accounts for businesses and consumers, and savings accounts. The principal loan products offered by the Bank are fixed and adjustable rate residential and commercial mortgages, construction loans, commercial business loans, home equity loans, and lines of credit.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) for interim information and with the instructions to Form 10-Q, as applicable to a smaller reporting company. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements.

The foregoing consolidated financial statements are unaudited; but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of December 31, ~~2020~~2021 have been derived from the audited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in Quaint Oak Bancorp’s ~~2020~~2021 Annual Report on Form 10-K. The results of operations for the six months ended June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022.

Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)

Use of Estimates in the Preparation of Financial Statements. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Company’s most significant estimates are the determination of the allowance for loan losses and the valuation of deferred tax assets.

~~Note~~ 1– ~~Financial Statement Presentation and Significant Accounting Policies (Continued)~~

Critical Accounting Policies. The Company’s critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, ~~2021~~2022 have remained unchanged from the disclosures presented in our Annual Report on Form 10~~-K, except for the following:~~-K.

~~Intangible Assets. Intangible assets on the consolidated balance sheets represent the acquisition by Quaint Oak Insurance Agency of the renewal rights to the book of business on~~ ~~August 1, 2016~~ at a total cost of $1.0 million. Based on a valuation, $515,000 of the purchase price was determined to be goodwill and $485,000 was determined to be related to the renewal rights to the book of business and deemed an other intangible asset. The renewal rights are being amortized over a ~~ten~~ ~~year period based upon the annual retention rate of the book of business. Also included in intangible assets is $2.6 million recognized as part of the acquisition of Oakmont Capital Holdings, LLC.~~

~~The Company will complete a goodwill and other intangible asset analysis at least on an annual basis or more often if events and circumstances indicate that there~~ ~~may~~ ~~be impairment.~~

Recent Accounting Pronouncements Not Yet Adopted. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, ~~2019,~~2022, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. We expect to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective.

The Company has contracted with a third-party software vendor to assist with the implementation of CECL. The Company is actively working on preliminary test calculations, data validation, as well as process and procedural documentation. The Company is currently conducting runs of the CECL model and the incurred-loss model in parallel, and it is expected that a third-party vendor will perform validation of the model in the third quarter of 2022. The new model will include additional assumptions used to calculate credit losses over the estimated life of financial assets and will include the impact of forecasted economic conditions. While the total impact of CECL to the Company’s financial statements is unknown at this time, the Company recognizes it may be material.

Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)

In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

~~Note~~ 1– ~~Financial Statement Presentation and Significant Accounting Policies (Continued)~~

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”) filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This ~~update~~Update is not expected to have a significant impact on the Company’s financial statements.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. In November, 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 944, Financial Services – Insurance, for public business entities that are SEC filers, except for smaller reporting companies, to fiscal years beginning after December 15, 2021, and interim periods within those fiscal years and for all other entities, including smaller reporting companies, to fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This ~~Update~~ is not expected to have a significant impact on the Company’s financial statements.

In ~~December 2019,~~ ~~the FASB issued ASU~~ ~~2019~~-~~12,~~~~Income Taxes (Topic~~ ~~740~~), ~~to simplify the accounting for income taxes, change the accounting for certain tax transactions, and make minor improvements to the codification. This Update provides a policy election to~~ ~~not~~ ~~allocate consolidated income taxes when a member of a consolidated tax return is~~ ~~not~~ subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or a separate transaction. The Update also changes current guidance for making an intraperiod allocation, if there is a loss in continuing operations and gains outside of continuing operations; determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; accounting for tax law changes and year-to-date losses in interim periods; and determining how to apply the income tax guidance to franchise taxes that are partially based on income.

Note 1 – Financial Statement Presentation and Significant Accounting Policies (Continued)

~~For public business entities, the amendments in this Update are effective for fiscal years and interim periods within those fiscal years, beginning after~~ ~~December 15, 2020.~~ ~~For all other entities, the amendments are effective for fiscal years beginning after~~ ~~December 15, 2021,~~ ~~and interim periods within fiscal years beginning after~~ ~~December 15, 2022.~~ ~~This Update is~~ ~~not~~ ~~expected to have a significant impact on the Company’s financial statements.~~

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU was issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities. Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic 842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU 2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to re-measure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In ~~October 2020,~~ ~~the FASB issued ASU~~ ~~2020~~-~~08,~~~~Codification Improvements to Subtopic~~ ~~310~~-~~20,~~ ~~Receivables~~ – ~~Nonrefundable Fees and Other Costs,~~ ~~which clarifies that, for each reporting period, an entity should reevaluate whether a callable debt security is within the scope of ASC~~ ~~310~~-20-35-~~33.~~ ~~For public business entities, ASU~~ ~~2020~~-08 ~~is effective for fiscal years, and interim periods within those fiscal years, beginning after~~ ~~December 15, 2020.~~ ~~Early application is~~ ~~not~~ ~~permitted. For all other entities, ASU~~ ~~2020~~-08 ~~is effective for fiscal years beginning after~~ ~~December 15, 2021,~~ ~~and interim periods within fiscal years beginning after~~ ~~December 15, 2022.~~ ~~The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.~~

~~Note~~ 1– ~~Financial Statement Presentation and Significant Accounting Policies (Continued)~~

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848. ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. ASU 2021-01 is effective immediately for all entities. Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

Note 1– Financial Statement Presentation and Significant Accounting Policies (Continued)

In March 2022, the FASB issued ASU 2022-02,Financial Instruments - Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption using prospective application, including adoption in an interim period where the guidance should be applied as of the beginning of the fiscal year. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

Reclassifications.Certain items in the ~~2020~~2021 consolidated financial statements have been reclassified to conform to the presentation in the ~~2021~~2022 consolidated financial statements. Such reclassifications did not have a material impact on the presentation of the overall financial statements. The reclassifications had no effect on net income or stockholders’ equity.

Earnings per share (“EPS”) consists of two separate components, basic EPS and diluted EPS. Basic EPS is computed based on the weighted average number of shares of common stock outstanding for each period presented. Diluted EPS is calculated based on the weighted average number of shares of common stock outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of shares that are assumed to have been purchased with the proceeds from the exercise of stock options, as well as unvested restricted Earnings per share (“EPS”) consists of two separate components, basic EPS and diluted EPS. Basic EPS is computed based on the weighted average number of shares of common stock outstanding for each period presented. Diluted EPS is calculated based on the weighted average number of shares of common stock outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist of shares that are assumed to have been purchased with the proceeds from the exercise of stock options, as well as unvested restricted stock awards. Common stock equivalents which are considered antidilutive are not included for the purposes of this calculation. For the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, all outstanding stock options granted under the 2008 Stock Option Plan, the 2013 Stock Incentive Plan and the 2018 Stock Incentive Plan representing shares were dilutive.

The following table sets forth the composition of the weighted average shares (denominator) used in the basic and dilutive earnings per share computations.

Note 32 – ~~Accumulated Other Comprehensive Income (Loss)~~Earnings Per Share (Continued)

The following table presents the changes in accumulated other comprehensive income (loss) by component, net of tax, for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive ~~loss~~(loss) income for the three ~~months~~ and ~~the~~ six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):

The investment in interest-earning time deposits as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, by contractual maturity, are shown below (in thousands):

The amortized cost, gross unrealized gains and losses, and fair value of investment securities available for sale at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are summarized below (in thousands):

The amortized cost and fair value of mortgage-backed securities at June 30, ~~2021,~~2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties (in thousands):

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at June 30, ~~2021~~ ~~and~~ ~~December 31, 2020~~2022 (in thousands):

At ~~June 30,~~December 31, 2021, there ~~was~~ ~~one~~ ~~security~~were 0 securities in an unrealized loss position that at such date had an aggregate depreciation of 0.16% from the Company’s amortized cost basis. Management believes that the estimated fair value of the security disclosed above is primarily dependent on the movement of market interest rates. Management evaluated the length of time and the extent to which the fair value has been less than cost and the financial condition and near term prospects of the issuer, including any specific events which ~~may~~ ~~influence the operations of the issuer. The Company has the ability and intent to hold the security until the anticipated recovery of fair value occurs. Management does~~ ~~not~~ ~~believe the individual unrealized loss as of~~ ~~June 30, 2021~~ ~~represents an other-than-temporary impairment.~~position. There were 0 impairment charges recognized during the three or six months ended June 30, ~~2021~~2022 or ~~2020.~~2021.

~~Note~~ 6 ~~- Loans Receivable, Net~~)Includes $13.1 million and ~~Allowance for Loan Losses (Continued)~~$42.6 million of PPP loans at June 30, 2022 and December 31, 2021, respectively.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of June 30, ~~2021~~2022 as well as the average recorded investment and related interest income for the period then ended (in thousands):

The following table presents impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of December 31, ~~2020~~2021 as well as the average recorded investment and related interest income for the year then ended (in thousands):

The loan portfolio also includes certain loans that have been modified in a troubled debt restructuring, where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forbearance, or other actions. At both June 30, 2022, and December 31, 2021, the Company had two loans totaling $140,000 that were identified as troubled debt restructurings. One of these loans was performing in accordance with its modified terms and one was on non-accrual as of June 30, ~~2021.~~2022. During the period ended June 30, ~~2021,~~2022, no new loans were identified as TDRs. At ~~December 31, 2020,~~ ~~the Company had~~ ~~two~~ ~~loans totaling $150,000 that were identified as troubled debt restructurings. Both of these loans were performing in accordance with their modified terms.~~ If a TDR is placed on non-accrual it is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable.

The following tables present the Company’s TDR loans as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollar amounts in thousands):

The contractual aging of the TDRs in the table above as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows (in thousands):

Any reserve for an impaired TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. At June 30, ~~2021~~2022 there were 0 commitments to lend additional funds to debtors whose loan terms have been modified as TDRs.

The general practice of the Bank is to work with borrowers so that they are able to pay back their loan in full. If a borrower continues to be delinquent or cannot meet the terms of a TDR modification and the loan is determined to be uncollectible, the loan will be charged off.

Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the three and six months ended June 30, 2022 and recorded investment in loans receivable as of June 30, 2022 (in thousands):

The Bank allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the three and six months ended June 30, 2022, due primarily to changes in quantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the construction loan portfolio class for the three and six months ended June 30, 2022 due primarily to qualitative and quantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the six months ended June 30, 2022, due primarily to changes in quantitative factors in this portfolio class. The Bank allocated decreased allowance for loan loss provisions to the multi-family residential loan portfolio class for the three and six months ended June 30, 2022 due primarily to qualitative factors in this portfolio class. The Bank allocated decreased allowance for loan loss provisions to the commercial business loan portfolio class for the three months ended June 30, 2022, due primarily to changes in qualitative and quantitative factors in this portfolio class.

Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the three and six months ended June 30, 2021 and recorded investment in loans receivable as of June 30, 2021 (in thousands):

~~The Bank allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2021,~~ ~~due primarily to changes in quantitative factors in this portfolio class.~~

The Bank allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the three ~~and~~ ~~six~~ months ended June 30, 2021, due primarily to changes in qualitative and quantitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the ~~construction loan portfolio class for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2021,~~ due primarily to changes in quantitative factors in this portfolio class. In general, the primary driver of the increase in qualitative factors was the economic trends factor associated with the COVID-19 ~~pandemic.~~

~~Note~~ 6 ~~- Loans Receivable, Net and Allowance for Loan Losses (Continued)~~

~~Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~and recorded investment in loans receivable as of~~ ~~June 30, 2020 (~~~~in thousands):~~

~~The Bank allocated increased allowance for loan loss provisions to the~~ commercial real estate loan portfolio class for the three ~~and~~ ~~six~~months ended June 30, ~~2020,~~ ~~due primarily to changes in volume and qualitative factors in this portfolio class. The Bank allocated decreased allowance for loan loss provisions to the construction loan class for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020,~~ ~~due primarily to a decrease in balances and qualitative factors in this portfolio classes. The Bank allocated increased allowance for loan loss provisions to the~~ 1-4 ~~family non-owner occupied loan portfolio class for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020,~~2021, due primarily to changes in qualitative factors in this portfolio class. In general, the primary driver of the increase in qualitative factors was the economic trends factor associated with the COVID-19 pandemic.

Following is a summary, by loan portfolio class, of changes in the allowance for loan losses for the year ended December 31, ~~2020~~2021 and recorded investment in loans receivable based on impairment evaluation as of December 31, 2021 (in thousands):

The Bank allocated increased allowance for loan loss provisions to the commercial real estate loan portfolio class for the year ended December 31, ~~2020,~~2021, due primarily to changes in volume and qualitative factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the commercial business loan portfolio class for the year ended December 31, ~~2020,~~2021, due primarily to changes in qualitative ~~and quantitative~~ factors in this portfolio class. The Bank allocated increased allowance for loan loss provisions to the multi-family loan portfolio class for the year ended December 31, ~~2020,~~2021, due primarily to changes in qualitative factors in this portfolio class. The Bank allocated ~~decreased~~increased allowance for loan loss provisions to the construction loan portfolio class for the year ended December 31, ~~2020,~~2021, due primarily to changes in quantitative and qualitative factors in this portfolio class. In general, the primary driver of the increase in qualitative factors was the economic trends factor associated with the COVID-19 pandemic. In this regard, the Bank increased the unallocated component of the allowance for the year ended December 31, ~~2020~~2021 to cover uncertainties that could affect management’s estimate of probable losses primarily associated with the COVID-19 pandemic.

The following table presents non-accrual loans by classes of the loan portfolio as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of June 30, 2022 and December 31, 2021 (in thousands):

Non-performing loans, which consist of non-accruing loans plus accruing loans 90 days or more past due, amounted to ~~$9,000 and $643,000~~$1.7 million at June 30, ~~2021~~2022 and $9,000 at December 31, ~~2020,~~2021. ~~respectively.~~ For the delinquent loans in our portfolio, we have considered our ability to collect the past due interest, as well as the principal balance of the loan, in order to determine whether specific loans should be placed on non-accrual status. In cases where our evaluations have determined that the principal and interest balances are collectible, we have continued to accrue interest.

For the three ~~and~~ ~~six~~months ended June 30, ~~2021~~2022 and ~~2020~~2021 there was 0 interest income recognized on non-accrual loans on a cash basis. ~~Interest~~There was $79,000 of interest income foregone on non-accrual loans ~~was approximately~~for both the three and six months ended June 30, 2022 and $1,000 for both the three and six months ended June 30, 2021.~~Interest income foregone on non-accrual loans was approximately $3,000 and $5,000 for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020,~~ ~~respectively.~~

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status as of ~~June 30, 2021~~ ~~and~~ ~~December 31, 2020 (~~~~in thousands):~~

On January 4, 2021, the Bank acquired a majority ownership interest in Oakmont Capital Holdings, LLC, a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. The Bank recognized $2.1 million of goodwill as part of the acquisition of Oakmont Capital Holdings, LLC. On August 1, 2016, Quaint Oak Insurance Agency, LLC began operations by acquiring the renewal rights to ~~the~~a book of business produced and serviced by an independent insurance agency located in New Britain, Pennsylvania, that provides a broad range of personal and commercial insurance coverage solutions. The Company paid $1.0 million for these rights. Based on a valuation, $515,000 of the purchase price was determined to be goodwill and $485,000 was determined to be related to the renewal rights to the book of business and deemed to be an other intangible asset. This other intangible asset is being amortized over a ten year period based upon the annual retention rate of the book of business. The balance of other intangible asset at June 30, ~~2021~~2022 was ~~$247,000,~~$198,000, which is net of accumulated amortization of ~~$238,000.~~$287,000. Amortization expense for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 amounted to approximately $12,000 and ~~$24,000,~~$24,000, respectively.

On ~~January 4, 2021~~ Quaint Oak Bank acquired a 51% controlling interest in Oakmont Capital Holdings, LLC, a multi-state equipment finance company. Based on an independent valuation of the assets and liabilities acquired it was determined that $2.6 million in goodwill be recognized as part of the transaction.

Federal Home Loan Bank advances consist of the following at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):

Federal Reserve Bank long-term borrowings decreased ~~$30.3~~$3.9 million, or ~~62.9%~~100.0%, to ~~$17.9 million~~NaN at June 30, ~~2021~~2022 from ~~$48.1~~$3.9 million at December 31, ~~2020~~2021 as the Company paid offfirst round PPP loans pledged as collateral under the FRB’s Paycheck Protection Program Liquidity Facility (PPPLF). The Company did not utilize the FRB’s PPPLF to fund second round PPP loans. Under the PPPLF the Company pledged certain PPP loans as collateral and borrowed from the Federal Reserve at a rate of 0.35% that is fixed for two years.

~~Other~~There were 0 other short-term borrowings ~~of $1.2 million represents~~representing outstanding balances on two lines of credit that Oakmont Capital Holdings, LLC has with a credit union which are used to fund equipment loans. Borrowing capacity on the two lines of credit total $11.0 million at June 30, ~~2021.~~2022.

The Company maintains an Employee Stock Ownership Plan (ESOP) for the benefit of employees who meet the eligibility requirements of the plan. Using proceeds from a loan from the Company, the ESOP purchased 8%, or 222,180 shares of the Company’s then outstanding common stock in the open market during 2007. The Bank ~~makes~~made cash contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to make the required loan payments to the ~~Company.~~ Company until the loan was repaid in full as of September 30, 2021. The loan ~~bears~~bore an interest rate of 7.75% per annum, with principal and interest ~~to be~~ paid quarterly in equal installments over 15 years pursuant to the terms of the original note. The loan iswas secured by the unallocated shares of common stock held by the ESOP. AsThe Bank made cash contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to make the required loan payments to the Company until the loan was repaid in full as ofSeptember 30, 2021.

During the second quarter of 2022, the Company made a discretionary contribution of 4,000 shares to the ESOP. These shares were released from Treasury Stock at a cost of approximately $84,000. During the three and six months ended June 30, ~~2021,~~2022, ~~there was~~ ~~one~~ ~~quarterly payment remaining on the~~ ~~2007~~ ~~loan.~~

Shares of the Company’s common stock purchased by the ESOP are held in a suspense account and reported as unallocated common stock held by the ESOP in stockholders’ equity until released for allocation to participants. As the debt is repaid, shares are released from collateral and are allocated to each eligible participant based on the ratio of each such participant’s base compensation to the total base compensation of eligible plan participants. As the unearned shares are committed to be released and allocated among participants, the Company ~~recognizes compensation~~recognized $84,000 and $175,000 of ESOP expense, ~~equal to the average market value of the shares, and the shares become outstanding for earnings per share computations.~~respectively. During the three and six months ended June 30, 2021, the Company recognized $63,000 and $122,000 of ESOP expense, respectively. ~~During the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2020,~~ ~~the Company recognized $37,000 and $89,000 of ESOP expense, respectively.~~

InIn May 2013, the shareholders of Quaint Oak Bancorp approved the adoption of the 2013 Stock Incentive Plan (the “2013 Stock Incentive Plan”). The 2013 Stock Incentive Plan approved by shareholders in May 2013 covered a total of 195,000 shares, of which 48,750, or 25%, may be restricted stock awards, for a balance of 146,250 stock options assuming all the restricted shares are awarded. In May 2018, the shareholders of Quaint Oak Bancorp approved the adoption of the 2018 Stock Incentive Plan (the “2018 Stock Incentive Plan”). The 2018 Stock Incentive Plan approved by shareholders in May 2018 covered a total of 155,000 shares, of which 38,750, or 25%, may be restricted stock awards, for a balance of 116,250 stock options assuming all the restricted shares are awarded.

As of June 30, ~~2021~~2022 a total of 18,845 share awards were unvested under the 2013 and 2018 Stock Incentive Plans and up to 11,750 share awards were available for future grant under the 2018 Stock Incentive Plan and ~~1,200~~1,800 share awards under the 2013 Stock Incentive Plan. The 2013 and 2018 Stock Incentive Plan share awards have vesting periods of five years.

A summary of the status of the share awards under the 2013 and 2018 Stock Incentive Plans as of June 30, ~~2021~~2022 and ~~2020~~2021 and changes during the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 is as follows:

Compensation expense on the restricted stock awards is recognized ratably over the five year vesting period in an amount which is equal to the fair value of the common stock at the date of grant. During the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recognized approximately ~~$30,000~~$31,000 and ~~$32,000 of compensation expense, respectively. During the~~ ~~six~~ ~~months ended~~ ~~June 30, 2021~~ ~~and~~ ~~2020,~~ ~~the Company recognized approximately $62,000 and $65,000~~$30,000 of compensation expense, respectively. A tax benefit of approximately ~~$13,000~~$7,000 and ~~$14,000~~$6,000 was recognized during the three months ended June 30, 2022 and 2021, respectively. During both the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, ~~respectively.~~the Company recognized approximately $62,000 of compensation expense. A tax benefit of approximately $13,000 was recognized during both the six months ended June 30, 2022 and 2021. As of June 30, ~~2021,~~2022, approximately ~~$245,000~~$106,000 in additional compensation expense will be recognized over the remaining service period of approximately ~~1.9~~0.9 years.

In May 2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008 Stock Option Plan (the “Option Plan”). The Option Plan authorized the grant of stock options to officers, employees and directors of the Company to acquire 277,726 shares of common stock with an exercise price no less than the fair market value on the date of the grant. The Option Plan expired February 13, 2018, however, outstanding options granted in 2013 remain valid and existing for the remainder of their 10 year terms. As described above under “Stock Incentive Plans – Share Awards”, the 2013 Stock Incentive Plan approved by shareholders in May 2013 covered a total of 195,000 shares, of which 146,250 may be stock options assuming all the restricted shares are awarded. The 2018 Stock Incentive Plan approved by shareholders in May 2018 covered a total of 155,000 shares, of which 116,250 may be stock options assuming all the restricted shares are awarded.

All incentive stock options issued under the Option Plan and the 2013 and 2018 Stock Incentive Plans are intended to comply with the requirements of Section 422 of the Internal Revenue Code. Options will become vested and exercisable over a five year period and are generally exercisable for a period of ten years after the grant date.

As of June 30, ~~2021,~~2022, a total of ~~233,136~~214,136 grants of stock options were outstanding under the Option Plan and 2013 and 2018 Stock Incentive Plans and 37,250 stock options were available for future grant under the 2018 Stock Incentive Plan, ~~3,200~~6,200 stock options under the 2013 Stock Incentive Plan and ~~none~~NaN under the Option Plan. Options will become vested and exercisable over a five year period and are generally exercisable for a period of ten years after the grant date.

Stock Option and Stock Incentive Plans – Stock Options (Continued)

A summary of option activity under the Company’s Option Plan and 2013 and 2018 Stock Incentive Plans as of June 30, ~~2021~~2022 and ~~2020~~2021 and changes during the ~~six~~three months ended June 30, ~~2021~~2022 and ~~2020~~2021 is as follows:

~~The estimated fair value of the options granted in~~ ~~May 2018~~ ~~was $1.75 per share. The fair value was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:~~

The dividend yield was calculated on the dividend amount and stock price existing at the grant date. The risk free interest rate used was based on the rates of United States Treasury securities with maturities equal to the expected lives of the options. Although the contractual term of the options granted is ~~ten~~ years, the expected term of the options is less. Management estimated the expected term of the stock options to be the average of the vesting period and the contractual term. The expected stock-price volatility was estimated by considering the Company’s own stock volatility. The actual future volatility ~~may~~ ~~differ from our historical volatility.~~

During both the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, approximately $11,000 in compensation expense on stock options was recognized. A tax benefit of approximately ~~$1,000,~~$1,000, was recognized during each of these periods. During both the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, approximately $22,000 ofin compensation expense on stock options was recognized. A tax benefit of approximately ~~$1,000,~~$1,000, was recognized during each of these periods. As of June 30, ~~2021,~~2022, approximately ~~$83,000~~$39,000 in additional compensation expense will be recognized over the remaining service period of approximately ~~1.9~~0.9 years.

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments

Fair value estimates are based on quoted market prices, if available, quoted market prices of similar assets or liabilities, or the present value of expected future cash flows and other valuation techniques. These valuations are significantly affected by discount rates, cash flow assumptions, and risk assumptions used. Therefore, fair values estimates may not be substantiated by comparison to independent markets and are not intended to reflect the proceeds that may be realizable in an immediate settlement of the instruments.

~~Note~~ 11– ~~Fair Value Measurements and Fair Values of Financial Instruments (Continued)~~

Fair value is determined at one point in time and is not representative of future value. These amounts do not reflect the total value of a going concern organization. Management does not have the intention to dispose of a significant portion of its assets and liabilities and therefore, the unrealized gains or losses should not be interpreted as a forecast of future earnings and cash flows.

The following disclosures show the hierarchal disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing are as follows:

The methods of determining the fair value of assets and liabilities presented in this note are consistent with our methodologies disclosed in Note 19 of the Company’s ~~2020~~2021 Form 10-K, as the fair value of loans, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using discounted cash flow analyses. The discount rates used to determine fair value use interest rate spreads that reflect factors such as liquidity, credit and non-performance risk. Loans are considered a Level 3 classification.

The following is a discussion of assets and liabilities measured at fair value on a recurring and non-recurring basis and valuation techniques applied:

Investment Securities Available For Sale: The fair value of securities available for sale are determined by using matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

We may be required from time to time to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets.

Impaired Loans: Impaired loans are carried at the lower of cost or the fair value of the collateral for collateral-dependent loans less estimated costs to sell. Collateral is primarily in the form of real estate. The use of independent appraisals, discounted cash flow models and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and impaired loans are therefore classified within Level 3 of the fair value hierarchy.

~~Note~~ 11– ~~Fair Value Measurements and Fair Values of Financial Instruments (Continued)~~

Other Real Estate Owned: Other real estate owned is carried at the lower of the investment in the real estate or the fair value of the real estate less estimated selling costs. The use of independent appraisals and management’s best judgment are significant inputs in arriving at the fair value measure of the underlying collateral and therefore other real estate owned is classified within Level 3 of the fair value hierarchy.

Note 11– Fair Value Measurements and Fair Values of Financial Instruments (Continued)

The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of June 30, ~~2021~~2022 (in thousands):

The table below sets forth the financial assets and liabilities that were accounted for on a recurring and nonrecurring basis by level within the fair value hierarchy as of December 31, ~~2020~~2021 (in thousands):

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has used Level 3 inputs to determine fair value as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):

The estimated fair values of the Company’s financial instruments that are not required to be measured or reported at fair value were as follows at June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):

3132

Quaint Oak Bancorp, Inc.

~~Quaint Oak Bancorp, Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Notes to Unaudited Consolidated Financial Statements

Note 11 – Fair Value Measurements and Fair Values of Financial Instruments (Continued)

					Fair Value Measurements at										Fair Value Measurements at
					December 31, 2020										December 31, 2021
	Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Carrying Amount		Fair Value Estimate		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Financial Assets
Investment in interest-earning time deposits	$	9,463	$	9,842	$	0	$	0	$	9,842	$	7,924	$	8,091	$	0	$	0	$	8,091
Loans held for sale		53,191		62,396		0		62,396		0		107,823		112,843		0		112,843		0
Loans receivable, net		356,122		363,527		0		0		363,527		403,966		409,203		0		0		409,203

Financial Liabilities
Deposits		354,845		358,112		155,417		0		202,695		447,166		446,576		267,255		0		179,321
FHLB long-term borrowings		28,193		28,284		0		0		28,284		23,193		23,231		0		0		23,231
FRB long-term borrowings		48,134		48,126		0		0		48,126		3,895		3,895		0		0		3,895
Subordinated debt		7,899		8,283		0		0		8,283		7,933		8,312		0		0		8,312

For cash and cash equivalents, accrued interest receivable, investment in FHLB stock, bank-owned life insurance, FHLB short-term borrowings, accrued interest payable, and advances from borrowers for taxes and insurance, the carrying value is a reasonable estimate of the fair value and are considered Level 1 measurements.

Note 12 – Operating Segments

The Company's operations currently consist of 2two reportable operating segments: Banking and Mortgage Banking. The Company offers different products and services through its two segments. The accounting policies of the segments are generally the same as those of the consolidated company.

The Banking Segment generates its revenues primarily from its lending, deposit gathering and fee business activities. The profitability of this segment's operations depends primarily on its net interest income after provision for credit losses, which is the difference between interest earned on interest earning assets and interest paid on interest bearing liabilities less provision for credit losses. The provision for credit losses is almost entirely dependent on changes in the Banking Segment's loan portfolio and management’s assessment of the collectability of the loan portfolio as well as prevailing economic and market conditions. The profitability of this segment’s operations also depends on the generation of non-interest income which includes fees and commissions generated by Quaint Oak Bank and its wholly-owned subsidiaries, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, ~~and~~ Quaint Oak Insurance Agency, LLC, Oakmont Capital Holdings, LLC, and Oakmont Commercial, LLC, which are included in the Banking Segment for segment reporting purposes. The Banking Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of depositors and other customers, federal deposit insurance funds and the banking system as a whole. These laws and regulations govern such areas as capital, permissible activities, allowance for loan and lease losses, loans and investments, and rates of interest that can be charged on loans. For segment reporting purposes, Quaint Oak Bancorp, Inc. is included as part of the Company’s Banking segment.

The Mortgage Banking Segment originates residential mortgage loans which are sold into the secondary market along with the loans’ servicing rights. The profitability of this segment’s operations depends primarily on the gains realized from the sale of loans and processing fees. The Mortgage Banking Segment is also subject to an extensive system of laws and regulations that are intended primarily for the protection of consumers.

3233

Quaint Oak Bancorp, Inc.

~~Quaint Oak Bancorp, Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Notes to Unaudited Consolidated Financial Statements

Note 12 – Operating Segments (Continued)

The following table presents summary financial information for the reportable segments (in thousands):

	As of or for the Three Months Ended June 30,																As of or for the Three Months Ended June 30,
	2021							2020									2022							2021
	Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated		Quaint Oak Bank(1)			Quaint Oak Mortgage			Consolidated			Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated		Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated
Net Interest Income (Loss)	$	4,799	$	(62	)	$	4,737	$	2,697		$	(40	)	$	2,657		$	5,807	$	3		$	5,810	$	4,799	$	(62	)	$	4,737
Provision for Loan Losses		448		0			448		305			0			305			599		0			599		448		0			448
Net Interest Income after Provision for Loan Losses		4,351		(62	)		4,289		2,392			(40	)		2,352
Net Interest Income (Loss) after Provision for Loan Losses																		5,208		3			5,211		4,351		(62	)		4,289

Non-Interest Income
Mortgage banking, equipment lending and title abstract fees		402		120			522		208			143			351			805		19			824		402		120			522
Real estate sales commissions, net		33		0			33		30			0			30			64		0			64		33		0			33
Insurance commissions		133		0			133		120			0			120			139		0			139		133		0			133
Other fees and services charges		51		0			51		(49	)		0			(49	)		82		0			82		51		0			51
Loan servicing income		328		0			328		0			0			0
Net loan servicing income																		308		0			308		328		0			328
Income from bank-owned life insurance		21		0			21		20			0			20			22		0			22		21		0			21
Net gain on loans held for sale		421		914			1,335		0			826			826			2,222		636			2,858		421		914			1,335
Gain on sale of investment securities available for sale		45		0			45		0			0			0			0		0			0		45		0			45
Net gain on sale of other real estate owned		0		0			0		18			0			18
Gain on the sale of SBA loans		66		0			66		52			0			52			34		0			34		66		0			66
Total Non-Interest Income		1,500		1,034			2,534		399			969			1,368			3,676		655			4,331		1,500		1,034			2,534

Non-Interest Expense
Salaries and employee benefits		2,935		504			3,439		1,465			319			1,784			4,389		502			4,891		2,935		504			3,439
Directors’ fees and expenses		60		0			60		52			0			52			72		0			72		60		0			60
Occupancy and equipment		312		75			387		152			66			218			391		75			466		312		75			387
Data processing		127		75			202		118			42			160			131		32			163		127		75			202
Professional fees		200		18			218		95			18			113			203		25			228		200		18			218
FDIC deposit insurance assessment		73		0			73		27			0			27			113		0			113		73		0			73
Other real estate owned expenses		3		0			3		8			0			8			0		0			0		3		0			3
Advertising		109		13			122		62			13			75			121		33			154		109		13			122
Amortization of other intangible		12		0			12		12			0			12			12		0			12		12		0			12
Other		294		25			319		229			17			246			450		40			490		294		25			319
Total Non-Interest Expense		4,125		710			4,835		2,220			475			2,695			5,882		707			6,589		4,125		710			4,835

Pretax Segment Profit	$	1,726	$	262		$	1,988	$	571		$	454		$	1,025

Pretax Segment Profit (Loss)																	$	3,002	$	(49	)	$	2,953	$	1,726	$	262		$	1,988
Segment Assets	$	486,776	$	40,200		$	526,976	$	387,350		$	20,621		$	407,971		$	734,104	$	17,818		$	751,922	$	486,776	$	40,200		$	526,976

(1)

~~Includes Quaint Oak Bancorp, Inc. and the Bank’s~~

(1) Includes Quaint Oak Bancorp, Inc. and the Bank��s subsidiaries, Quaint Oak Real Estate, Quaint Oak Abstract, Quaint Oak Insurance Agency, QOB Properties, Oakmont

Commercial and Oakmont Capital Holdings, LLC.

3334

Quaint Oak Bancorp, Inc.

~~Quaint Oak Bancorp, Inc.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Notes to Unaudited Consolidated Financial Statements

Note 12 – Operating Segments (Continued)

	As of or for the Six Months Ended June 30,														As of or for the Six Months Ended June 30,
	2021							2020							2022							2021
	Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated		Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated		Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated		Quaint Oak Bank(1)		Quaint Oak Mortgage			Consolidated
Net Interest Income (Loss)	$	8,541	$	(176	)	$	8,365	$	4,987	$	(87	)	$	4,900	$	11,310	$	(23	)	$	11,287	$	8,541	$	(176	)	$	8,365
Provision for Loan Losses		702		0			702		420		0			420		1,278		0			1,278		702		0			702
Net Interest Income after Provision for Loan Losses		7,839		(176	)		7,663		4,567		(87	)		4,480
Net Interest Income (Loss) after Provision for Loan Losses																10,032		(23	)		10,009		7,839		(176	)		7,663

Non-Interest Income
Mortgage banking, equipment lending and title abstract fees		838		215			1,053		352		293			645		790		671			1,461		838		215			1,053
Real estate sales commissions, net		64		0			64		63		0			63		125		0			125		64		0			64
Insurance commissions		240		0			240		217		0			217		255		0			255		240		0			240
Other fees and services charges		173		0			173		34		0			34		248		0			248		173		0			173
Loan servicing income		551		0			551		0		0			0
Net loan servicing income																474		0			474		551		0			551
Income from bank-owned life insurance		40		0			40		39		0			39		43		0			43		40		0			40
Net gain on loans held for sale		1,045		1,505			2,550		0		1,607			1,607		6,546		522			7,068		1,045		1,505			2,550
Gain on sale of investment securities available for sale		362		0			362		0		0			0		0		0			0		362		0			362
Net gain on sale of other real estate owned		0		0			0		18		0			18
Gain on the sale of SBA loans		267		0			267		52		0			52		167		0			167		267		0			267
Total Non-Interest Income		3,580		1,720			5,300		775		1,900			2,675		8,648		1,193			9,841		3,580		1,720			5,300

Non-Interest Expense
Salaries and employee benefits		5,863		976			6,839		3,133		630			3,763		8,477		1,005			9,482		5,863		976			6,839
Directors’ fees and expenses		128		0			128		114		0			114		143		0			143		128		0			128
Occupancy and equipment		610		154			764		287		136			423		743		143			886		610		154			764
Data processing		257		150			407		226		71			297		289		71			360		257		150			407
Professional fees		346		35			381		192		35			227		361		51			412		346		35			381
FDIC deposit insurance assessment		124		0			124		47		0			47		229		0			229		124		0			124
Other real estate owned expenses		12		0			12		22		0			22		0		0			0		12		0			12
Advertising		200		27			227		123		27			150		297		65			362		200		27			227
Amortization of other intangible		24		0			24		24		0			24		24		0			24		24		0			24
Other		603		45			648		424		31			455		815		58			873		603		45			648
Total Non-Interest Expense		8,167		1,387			9,554		4,592		930			5,522		11,378		1,393			12,771		8,167		1,387			9,554

Pretax Segment Profit	$	3,252	$	157		$	3,409	$	750	$	883		$	1,633

Pretax Segment Profit (Loss)															$	7,302	$	(223	)	$	7,079	$	3,252	$	157		$	3,409
Segment Assets	$	486,776	$	40,200		$	526,976	$	387,350	$	20,621		$	407,971	$	734,104	$	17,818		$	751,922	$	486,776	$	40,200		$	526,976

(1) Includes Quaint Oak Bancorp, Inc. and the Bank’s subsidiaries, Quaint Oak Real Estate, Quaint Oak Abstract, Quaint Oak Insurance Agency, QOB Properties, Oakmont

Commercial and Oakmont Capital Holdings, LLC.

(1)

~~Includes Quaint Oak Bancorp, Inc. and the Bank’s subsidiaries, Quaint Oak Real Estate, Quaint Oak Abstract, Quaint Oak Insurance Agency, QOB Properties, and Oakmont Capital Holdings, LLC.~~

3435

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements Are Subject to Change

This Quarterly Report contains certain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder). Forward-looking statements are not historical facts but instead represent only the beliefs, expectations or opinions of the Company and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, or words of similar meaning, or future or conditional terms such as “will”, “would”, “should”, “could”, “may”, “likely”, “probably”, or “possibly.” Forward-looking statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to predict and generally are beyond the control of and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) economic and competitive conditions which could affect the volume of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of loan losses; (3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in which the Company is or will be doing business, being less favorable than expected;(6) political and social unrest, including acts of war or terrorism; (7) the impact of the current outbreak of the novel coronavirus (COVID-19) or (8) legislation or changes in regulatory requirements adversely affecting the business in which the Company is or will be engaged. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

General

The Company was formed in connection with the Bank’s conversion to a stock savings bank completed on July 3, 2007. The Company’s results of operations are dependent primarily on the results of the Bank, which is a wholly owned subsidiary of the ~~Company.~~Company, along with the Bank’s wholly owned subsidiaries. The Bank’s results of operations depend, to a large extent, on net interest income, which is the difference between the income earned on its loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings. Results of operations are also affected by provisions for loan losses, fee income and other non-interest income and non-interest expense. Non-interest expense principally consists of compensation, directors’ fees and expenses, office occupancy and equipment expense, data processing expense, professional fees, advertising expense, FDIC deposit insurance assessment, and other expenses. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial condition and results of operations.

At June 30, ~~2021,~~2022, the Bank has ~~five~~six wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, ~~and~~ Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, each a Pennsylvania limited liability company. The mortgage company offers mortgage banking primarily in the Lehigh Valley, Delaware Valley and Philadelphia County regions of Pennsylvania. The real estate and abstract companies offer real estate sales and title abstract services, respectively, primarily in the Lehigh Valley region of Pennsylvania. These companies began operation in July 2009. In February, 2019, Quaint Oak Mortgage opened a mortgage banking office in Philadelphia, Pennsylvania. QOB Properties, LLC began operations in July 2012 and holds Bank properties acquired through a foreclosure proceeding or acceptance of a deed in lieu of foreclosure. Quaint Oak Insurance Agency, LLC ~~located in Chalfont, Pennsylvania,~~ began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. ~~In February 2020, Quaint Oak Bank opened~~Oakmont Commercial, LLC was formed in October 2021 and operates as a ~~full-service retail banking office in Philadelphia, Pennsylvania.~~multi-state specialty commercial real estate financing company. As of January 4, 2021, the Bank holds a majority equity position in Oakmont Capital Holdings, LLC, a multi-state equipment finance company based in West Chester, Pennsylvania with a second significant facility located in Albany, Minnesota. All significant intercompany balances and transactions have been eliminated.

COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The effects of COVID-19 did not have a material impact on the financial results of the Company as of June 30, ~~2021.~~2022. Due to orders issued by the governor of Pennsylvania and for the health of our customers and employees, the Bank closed lobbies to all three branch offices but remained fully operational. Other immediate responses to the pandemic included some of the following actions by the Company:

• Moved more than 92% of its employees to remote work-from-home status.

• Waived fees on deposit accounts and cash management services.

In response to the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act provides an estimated $2.2 trillion of economy-wide financial stimulus to combat the pandemic and stimulate the economy in the form of financial aid to individuals, businesses, nonprofits, states, and municipalities through loans, grants, tax changes, and other types of relief.

The following describes some of our responses to COVID-19 relative to the CARES Act, and other effects of the pandemic on our business.

Paycheck Protection Program. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, we were automatically authorized to originate PPP loans and chose to participate. Since March 2020, the Company has continued to work diligently to help support its existing and new customers through the SBA Paycheck Protection Program (“PPP”), loan modifications, loan deferrals and fee waivers. On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) became law. The Economic Aid Act opened a new PPP loan period for first loans and implemented a second loan draw for certain PPP borrowers, each through May 31, 2021. Under the first round, the Company funded 854 PPP loans totaling $95.1 million. As of June 30, ~~2021, 725~~2022, 853 of these first round PPP loans totaling ~~$70.3~~$94.6 million were forgiven under the SBA forgiveness program. Under the second round of PPP the Company funded ~~982~~985 PPP loans totaling ~~$88.3 million as of June 30, 2021.~~$88.4 million. As of June 30, ~~2021, 44~~2022, 882 of the second round PPP loans totaling ~~$1.3~~$75.1 million have been forgiven under the SBA forgiveness program. ~~For the three and six months ended June 30, 2021, the~~The Company recognized approximately ~~$1.4 million~~$882,000 and ~~$2.0~~$4.4 million of deferred loan fees amortization related to PPP loans for the six months ended June 30, 2022 and the year ended December 31, 2021, respectively.

Paycheck Protection Program Liquidity Facility. The CARES Act also allocated a limited amount of funds to the Federal Reserve Board (FRB) with a broad mandate to provide liquidity to eligible businesses, states or municipalities in light of COVID-19. On April 9, 2020, the U.S. Department of the Treasury announced several new or expanded lending programs to provide relief for businesses and governments. One of these programs was the Paycheck Protection Program Liquidity Facility (PPPLF). Under the PPPLF, all depository institutions that originate PPP loans are eligible to borrow on a non-recourse basis from their regional Federal Reserve Bank using SBA PPP loans as collateral. The principal amount of loans will be equal to the PPP loans pledged as collateral. There are no fees associated with these loans and the interest rate is 35 basis points. The maturity date of PPPLF loans will be the same as the maturity date of the PPP loans pledged as collateral. The PPPLF loan maturity date will be accelerated if the underlying PPP loan goes into default and the lender sells the PPP loan to the SBA under the SBA guarantee. The PPPLF loan maturity date also will be accelerated for any loan forgiveness reimbursement received by the lender from the SBA.

3637

In April 2020, the Bank received approval to borrow from the FRB under the PPPLF program to assist in funding PPP loans. Through ~~December 31, 2020,~~June 30, 2022, the Bank used the FRB program to fund $52.1 million of PPP loans. ~~Through June 30, 2021, the~~The Bank paid ~~off approximately $34.3 million of~~all PPP loans pledged as collateral under the PPPLF ~~program.~~program and had no outstanding advances with the FRB at June 30, 2022. Through June 30, ~~2021~~2022 the Bank has not used the PPPLF program to fund any round two PPP loans.

Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less than 30 days past due as of December 31, 2019 will be considered current for COVID-19 modifications. A financial institution can then suspend the requirements under GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (“TDR”), and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2022 or the 60th day after the end of the COVID-19 national emergency. Quaint Oak Bank has made that election. Similarly, the Financial Accounting Standards Board has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief will not be considered TDRs.

Prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act.

The Bank addresses loan payment modification requests on a case-by-case basis considering the effects of the COVID-19 pandemic, related economic slow-down and stay-at-home orders on our customer and their current and projected cash flows through the term of the loan. Through June 30, ~~2021,~~2022, the Bank modified 231 loans with principal balances totaling $90.6 million representing approximately ~~23.5%~~16.4% of our June 30, ~~2021~~2022 loan balances. A majority of deferrals are two-month payment deferrals of principal and interest, with payments after deferral increased to collect amounts deferred. In some cases, certain loans were granted additional deferrals. As of June 30, 2022 there are no loans that are still on deferral.

~~Details with respect to total loan payment modifications made through June 30, 2021 are as follows:~~

Number of
COVID-19
Deferments

Balance
(in
thousands)

Percent of
Total Loans
at June 30,
2021

One-to-four family residential owner occupied
5 $ 2,070 21.7 %
One-to-four family residential non-owner occupied
50 8,566 20.9
Multi-family residential
12 9,042 39.3
Commercial real estate
97 55,274 40.3
Construction
1 702 5.2
Home equity
4 254 5.9
Commercial business
62 14,685 9.4
Total
231 $ 90,593 23.5 %

3738

~~Of the 231 loans granted loan payment deferrals through June 30, 2021, 10 loans are still on deferral as of June 30, 2021.~~

~~Details with respect to loan payment deferrals still on deferral as of June 30, 2021 are as follows:~~

As of June 30, 2021

Number of
COVID-19
Deferments

Balance
(in
thousands)

Percent of
Total Loans
at June 30,
2021

One-to-four family residential owner occupied
1 $ 415 4.4 %
Commercial real estate
3 3,406 2.5
Commercial business
6 4,103 2.6
Total
10 $ 7,924 2.1 %

~~It is too early to determine if current active modified loans will perform in accordance with their modified terms.~~

Critical Accounting Policies

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the period or in future periods.

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, ~~2021~~2022 have remained unchanged from the disclosures presented in our Annual Report on Form ~~10-K, except for Intangible Assets which is described in Note 1 of the notes to our financial statements.~~10-K.

Comparison of Financial Condition at June30, ~~2021~~2022 and December 31, ~~2020~~2021

General. The Company’s total assets at June 30, ~~2021~~2022 were ~~$527.0~~$751.9 million, an increase of ~~$42.9~~$197.8 million, or ~~8.9%~~35.7%, from ~~$484.1~~$554.1 million at December 31, ~~2020.~~2021. This growth in total assets was primarily due to a ~~$46.2~~$143.5 million, or ~~86.8%~~35.5%, increase in loans receivable, net, and a $68.2 million, or 636.9%, increase in cash and cash equivalents. These increases were partially offset by a $17.5 million, or 16.2%, decrease in loans held for sale, and a ~~$17.2 million,~~$578,000, or ~~4.8%, increase in loans receivable, net. These increases were partially offset by a $15.0 million, or 44.2%, decrease in cash and cash equivalents and a $6.1 million, or 57.3%~~14.3%, decrease in investment securities available for ~~sale at fair value.~~sale. The largest increases within the loan portfolio occurred in ~~construction~~commercial real estate loans which increased ~~$8.8~~$114.5 million, or ~~183.7%~~62.3%, ~~commercial real estate which increased $5.1 million, or 3.8%, commercial business~~multi-family residential loans which increased ~~$2.4~~$14.2 million, or ~~1.6%~~48.4%, one-to-four family owner occupied loans which increased ~~$2.0~~$5.9 million, or ~~26.5%~~60.1%, and ~~one-to-four family non-owner occupied~~construction loans which increased ~~$2.0~~$9.9 million, or ~~5.2%~~62.2%. The increase in commercial ~~business~~real estate loans was primarily due ~~primarily~~ to the ~~$88.3~~purchase of a $55.5 million ~~of round two of SBA PPP loans generated during the period ended June 30, 2021.~~loan portfolio by Oakmont Commercial, LLC in April, 2022.

Cash and Cash Equivalents. Cash and cash equivalents ~~decreased $15.0~~increased $68.2 million, or ~~44.2%~~636.9%, from ~~$33.9~~$10.7 million at December 31, ~~2020~~2021 to ~~$18.9~~$78.9 million at June 30, ~~2021, as~~2022, with the expectation that excess liquidity ~~was~~will be used ~~primarily~~ to fund loans. The increase in cash and cash equivalents was primarily due to the proceeds from the sale of a large pool of equipment loans at the end of June 2022.

Investment in Interest-Earning Time Deposits.Investment in interest-earning time deposits ~~decreased $1.5 million,~~increased $287,000, or ~~15.7%~~3.6%, from ~~$9.5~~$7.9 million at December 31, ~~2020~~2021 to ~~$8.0~~$8.2 million at June 30, ~~2021~~2022 as ~~seven~~four interest-earning time deposits matured and were not renewed and five interest-earning time deposits were purchased during the ~~six~~three months ended June 30, ~~2021.~~2022.

Investment Securities Available for Sale.Investment securities available for sale decreased ~~$6.1 million,~~$578,000, or ~~57.3%~~14.3%, from ~~$10.7~~$4.0 million at December 31, ~~2020~~2021 to ~~$4.6~~$3.5 million at June 30, ~~2021, as~~2022, due primarily to the ~~Company sold four corporate notes totaling $5.5 million and realized $362,000 of gains~~principal repayments on these securities during the ~~transactions.~~six months ended June 30, 2022.

Loans Held for Sale.Loans held for sale ~~increased $46.2~~decreased $17.5 million, or ~~86.8%~~16.2%, from ~~$53.2~~$107.8 million at December 31, ~~2020~~2021 to ~~$99.4~~$90.3 million at June 30, ~~2021~~2022 as the Bank originated $176.9 million in equipment loans held for sale and sold $183.2 million of equipment loans during the six months ended June 30, 2022. Additionally, the Bank’s mortgage banking subsidiary, Quaint Oak Mortgage, LLC, originated ~~$100.7~~$70.2 million of one-to-four family residential loans during the six months ended June 30, ~~2021~~2022 and sold ~~$122.6~~$81.4 million of loans in the secondary market during this same period. Additionally, the Bank reclassified $17.4 million of equipment loans from loans receivable, net, to loans held for sale, received $9.8 million of loans held for sale from the formation of Oakmont Capital Holdings LLC, and originated $62.7 million in equipment loans held for sale during the six months ended June 30, 2021. During the six months ended June 30, 2021 the Company sold $21.8 million of equipment loans.

Loans Receivable, Net. Loans receivable, net, increased ~~$17.2~~$143.5 million, or ~~4.8%~~35.5%, to ~~$376.3~~$547.4 million at June 30, ~~2021~~2022 from ~~$359.1~~$404.0 million December 31, ~~2020.~~2021. This increase was funded primarily from deposits. Increases within the portfolio occurred in ~~construction~~commercial real estate which increased $114.5 million, or 62.3%, multi-family residential loans which increased ~~$8.8~~$14.2 million, or ~~183.7%, commercial real estate loans which increased $5.1 million, or 3.8%, commercial business loans which increased $2.4 million, or 1.6%~~48.4%, one-to-four family ~~residential~~ owner occupied loans which increased ~~$2.0~~$5.9 million, or ~~26.5%~~60.1%, ~~non-owner occupied~~and construction loans which increased ~~$2.0~~$9.9 million, or ~~5.2%, and home equity~~62.2%. The increase in loans ~~which increased $487,000, or 12.9%. These increases were~~receivable, net was partially offset by ~~decreases of $1.0~~a $1.4 million, or ~~4.2%~~1.1%, decrease in ~~multi-family residential~~commercial business loans. However, by excluding PPP loans ~~and $2,000,~~from this category, the balance of commercial business loans increased $26.2 million, or ~~11.8%, in other consumer loans.~~19.9%. The increase in commercial ~~business~~real estate loans was primarily due ~~primarily~~ to the ~~$88.3~~purchase of a $55.5 million ~~of the SBA PPP loans generated during the period ended June 30, 2021.~~loan portfolio by Oakmont Commercial, LLC in April, 2022. The Company continues its strategy of diversifying its loan portfolio with higher yielding and shorter-term loan products and selling substantially all of its newly originated one-to-four family owner-occupied loans into the secondary market.

~~Other Real Estate Owned.~~ Deposits.Other real estate owned (OREO) amounted to $342,000 at June 30, 2021 consisting of one property that is collateral for a non-performing construction loan. During the six months ended June 30, 2021, the Company made $56,000 of capital improvements to the property. Non-performing assets amounted to $351,000, or 0.07% of total assets at June 30, 2021 compared to $929,000, or 0.19% of total assets at December 31, 2020.

~~Deposits.~~ Total deposits increased ~~$70.7~~$142.6 million, or ~~19.9%~~31.9%, to ~~$425.5~~$589.8 million at June 30, ~~2021~~2022 from ~~$354.8~~$447.2 million at December 31, ~~2020.~~2021. This increase in deposits was primarily attributable to increases of ~~$84.4~~$127.3 million, or ~~84.7%~~63.4%, in money market accounts, ~~and $19.8~~$8.8 million, or ~~36.5%~~13.6%, in non-interest bearing checking ~~accounts.~~accounts, and $6.8 million, or 3.8%, in certificates of deposit. The increase in deposits was partially offset by a ~~$33.7 million,~~$295,000, or ~~16.9%~~16.1%, decrease in ~~certificates of deposit.~~savings accounts and a $5,000, or 50.0%, decrease in passbook accounts. The increase in ~~non-interest bearing checking~~money market accounts was primarily due to ~~the checking accounts opened by PPP loan customers.~~a $150.0 million deposit in May, 2022 through a deposit placement agreement with a third party bank.

Borrowings.Total Federal Home Loan Bank (FHLB) borrowings ~~decreased $4.0~~increased $50.0 million, or ~~10.5%~~101.6%, to ~~$34.2~~$99.2 million at June 30, ~~2021~~2022 from ~~$38.2~~$49.2 million at December 31, ~~2020.~~2021. During the six months ended June 30, ~~2021,~~2022, the Company ~~used excess liquidity to pay down $10.0~~borrowed $63.3 million of FHLB short-term borrowings and $80.0 million of FHLB long-term borrowings and paid down $89.3 million of FHLB short-term borrowings and $4.0 million of FHLB long-term borrowings. ~~At the end of the second quarter, the Company borrowed $10.0 million of short-term FHLB advances to provide additional liquidity in anticipation of loan funding needs.~~ Federal Reserve Bank (FRB) long-term borrowings decreased ~~$30.3~~$3.9 million, or ~~62.9%~~100.0%, to ~~$17.9 million~~none at June 30, ~~2021~~2022 from ~~$48.1~~$3.9 million at December 31, ~~2020~~2021 as the Company paid off first round PPP loans pledged as collateral under the FRB’s Paycheck Protection Program Liquidity Facility (PPPLF). The Company did not utilize the FRB’s PPPLF to fund second round PPP loans.

Accrued Expenses and Other ~~short-term borrowings~~Liabilities. Accrued expenses and other liabilities increased $2.3 million, or 37.8%, to ~~$1.2~~$8.3 million at June 30, ~~2021~~2022 from ~~none~~$6.0 million at December 31, ~~2020, representing outstanding balances on two lines of credit that Oakmont Capital Holdings, LLC has with a credit union which are used~~2021, due primarily to ~~fund equipment loans.~~an increase in tax and other expense accruals.

Stockholders’ Equity. Total stockholders’ equity increased ~~$4.5~~$5.3 million, or ~~15.6%~~14.3%, to ~~$33.2~~$42.2 million at June 30, ~~2021~~2022 from ~~$28.7~~$36.9 million at December 31, ~~2020.~~2021. Contributing to the increase was ~~noncontrolling interest of $2.2 million,~~ net income for the six months ended June 30, ~~2021~~2022 of ~~$2.5~~$4.0 million, net income attributable to noncontrolling interest of $1.5 million, common stock earned by participants in the employee stock ownership plan of ~~$122,000, the reissuance of treasury stock for exercised stock options of $87,000,~~$175,000, amortization of stock awards and options under our stock compensation plans of $84,000, ~~and~~ the reissuance of treasury stock under the Bank’s 401(k) Plan of ~~$33,000.~~$33,000 and the reissuance of treasury stock for exercised stock options of $148,000. These increases were partially offset by dividends paid of ~~$398,000, net loss attributable to~~$485,000, noncontrolling interest distribution of ~~$121,000,~~$176,000, other comprehensive loss, net of ~~$84,000,~~$41,000, and the purchase of treasury stock of ~~$25,000.~~$28,000.

Comparison of Operating Results for the Three Months Ended June 30, ~~2021~~2022 and ~~2020~~2021

General.Net income amounted to $1.8 million for the three months ended June 30, 2022, an increase of $261,000, or 17.3%, compared to net income of $1.5 million for the three months ended June 30, ~~2021, an increase of $778,000, or 106.4%, compared to net income of $731,000 for the three months ended June 30, 2020.~~2021. The increase in net income on a comparative quarterly basis was primarily the result of an increase in ~~net interest~~non-interest income of ~~$2.1~~$1.8 million, and an increase in ~~non-interest~~net interest income of ~~$1.2~~$1.1 million, partially offset by an increase in non-interest expense of ~~$2.1~~$1.8 million, an increase in the provision for loan losses of $151,000, and an increase in the provision for income taxes of ~~$273,000, and an increase in the provision for loan losses of $143,000.~~$91,000.

Net Interest Income. Net interest income increased ~~$2.1~~$1.1 million, or ~~78.3%,~~22.7% to $5.8 million for the three months ended June 30, 2022 from $4.7 million for the three months ended June 30, ~~2021 from $2.7 million for the three months ended June 30, 2020.~~2021. The increase was driven by a ~~$1.8~~$1.5 million, or ~~44.9%~~25.1%, increase in interest income. This increase in net interest income ~~and~~was partially offset by a ~~$270,000,~~$392,000, or ~~19.6%~~35.4%, ~~decrease~~increase in interest expense.

Interest Income. The ~~$2.1~~$1.5 million, or ~~78.3%~~25.1%, increase in ~~net~~ interest income for the three months ended June 30, ~~2021~~2022 over the comparable period in ~~2020 was driven by a $1.8 million, or 44.9%, increase in interest income. The increase in interest income~~2021 was primarily due to a ~~$169.3~~$104.6 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of ~~$316.5 million for the three months ended June 30, 2020 to an average balance of~~ $485.8 million for the three months ended June 30, 2021 to an average balance of $590.4 million for the three months ended June 30, 2022, and had the effect of increasing interest income ~~$1.0~~$1.2 million. Also contributing to the increase in interest income ~~on loans receivable, net, is~~was a $1.1 million increase in amortization of deferred loan fees for the six months ended June 30, 2021, primarily attributable to PPP loan forgiveness. This increase in interest income was partially offset by a 2016 basis point ~~decrease~~increase in the yield on average loans receivable, net, including loans held for sale, which ~~decreased~~increased from ~~4.92% for the three months ended June 30, 2020 to~~ 4.72% for the three months ended June 30, 2021 and had the effect of decreasing interest income $237,000. The decline in loan yield is primarily the result of lower yielding PPP loans funded from the second quarter of 2020 through the second quarter of 2021.

~~Interest Expense.~~ ~~The $270,000, or 19.6%, decrease in interest expense was primarily attributable~~ to ~~a 94 basis point decrease in rate on average certificate of deposit accounts, which decreased from 2.09%~~4.88% for the three months ended June 30, ~~2020~~2022, and had the effect of increasing interest income $230,000. Contributing to ~~1.15%~~both the increase in average balance of loans receivable, net and yield was the purchase of a $55.5 million commercial real estate loan portfolio by Oakmont Commercial, LLC in April, 2022.

Interest Expense. The $392,000, or 35.4%, increase in interest expense for the three months ended June 30, 2022 over the comparable period in 2021 ~~and had the effect of decreasing interest expense by $411,000. Interest expense on deposits continues to be actively managed to lower our cost of funds. This decrease~~ was ~~also partially~~primarily attributable to a ~~$16.7~~$52.6 million ~~decrease~~increase in average ~~certificate of deposit accounts~~FHLB long-term borrowings which ~~decreased~~increased from an average balance of ~~$191.6 million for the three months ended June 30, 2020 to an average balance of $174.9~~$26.4 million for the three months ended June 30, 2021 to an average balance of $79.1 million for the three months ended June 30, 2022, and had the effect of ~~decreasing~~increasing interest expense ~~$87,000. This decrease~~by $258,000. Also contributing to the increase in interest expense was ~~partially offset by~~ a ~~$144.1~~$77.1 million increase in average money market accounts which increased from an average balance of ~~$34.0 million for the three months ended June 30, 2020 to an average balance of $178.1~~$178.0 million for the three months ended June 30, 2021 to an average balance of $255.1 million for the three months ended June 30, 2022, and had the effect of increasing interest expense by ~~$290,000.~~$125,000. Also contributing to the increase in money market interest expense was a 10 basis point increase in the rate on average money market accounts, which increased from 0.65% for the three months ended June 30, 2021 to 0.75% for the three months ended June 30, 2022, and had the effect of increasing interest expense by $63,000. Both the increase in money market average balance and rate was impacted by a $150.0 million deposit in May, 2022 through a deposit placement agreement with a third party bank. Partially offsetting this increase in interest expense was a 22 basis point decrease in the rate on average certificate of deposit accounts, which decreased from 1.15% for the three months ended June 30, 2021 to 0.93% for the three months ended June 30, 2022, and had the effect of decreasing interest expense by $102,000. Also partially offsetting the increase in interest expense was a $32.6 million decrease in average FRB long-term borrowings which decreased from an average balance of $34.2 million for the three months ended June 30, 2021 to an average balance of $1.7 million for the three months ended June 30, 2022, and had the effect of decreasing interest expense by $28,000. The average interest rate spread increased from 3.28% for the three months ended June 30, 2021 to 3.37% for the three months ended June 30, 2022 while the net interest margin increased from 3.50% for the three months ended June 30, 2021 to 3.54% for the three months ended June 30, 2022.

Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

	Three Months Ended June 30,
	2022							2021
	Average Balance		Interest		Average Yield/ Rate			Average Balance		Interest		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing	$	50,148	$	42		0.33	%	$	40,420	$	8		0.08	%
Investment in interest-earning time deposits		7,071		28		1.58			7,965		51		2.56
Investment securities available for sale		3,682		8		0.76			6,075		30		1.98
Loans receivable, net (1) (2)		590,403		7,200		4.88			485,787		5,735		4.72
Investment in FHLB stock		4,442		30		2.70			1,274		19		5.97
Total interest-earning assets		655,746		7,308		4.46	%		541,521		5,843		4.32	%
Non-interest-earning assets		20,231							15,234
Total assets	$	675,977						$	556,755

Interest-bearing liabilities:
Passbook accounts	$	5	$	-	*	%	$	11	$	-	*	%
Savings accounts		1,548		1	0.26			1,536		1	0.26
Money market accounts		255,129		476	0.75			178,052		289	0.65
Certificate of deposit accounts		185,086		430	0.93			174,909		502	1.15
Total deposits		441,768		907	0.82			354,508		792	0.89

FHLB short-term borrowings		19,722		53	1.07			-		-	-
FHLB long-term borrowings		79,061		389	1.97			26,424		129	1.95
FRB long-term borrowings		1,656		1	0.24			34,245		29	0.34
Subordinated debt		7,944		130	6.55			7,910		130	6.57
Other short-term borrowings		458		18	15.72			2,133		26	4.88
Total interest-bearing liabilities		550,609		1,498	1.09	%		425,220		1,106	1.04	%
Non-interest-bearing liabilities		86,895						104,345
Total liabilities		637,504						529,565
Stockholders’ Equity		38,473						27,190
Total liabilities and Stockholders’ Equity	$	675,977					$	556,755
Net interest-earning assets	$	105,137					$	116,301
Net interest income; average interest rate spread			$	5,810	3.37	%			$	4,737	3.28	%
Net interest margin(3)					3.54	%					3.50	%
Average interest0earning assets to average
interest-bearing liabilities					119.09	%					127.35	%

________________________

* Not meaningful.

(1) Includes loans held for sale.

(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for loan losses.

(3) Equals net interest income divided by average interest-earning assets.

Provision for Loan Losses. The Company’s provision for loan losses increased $151,000, or 33.7%, to $599,000 for the three months ended June 30, 2022 from $448,000 for the three months ended June 30, 2021. The increase in the provision for loan losses for the three months ended June 30, 2022 over the three months ended June 30, 2021 was based on an evaluation of the allowance relative to such factors as volume of the loan portfolio, concentrations of credit risk, prevailing economic conditions, prior loan loss experience and amount of non-performing loans at June 30, 2022.

Non-performing loans amounted to $1.7 million, or 0.32%, of net loans receivable at June 30, 2022, consisting of two loans on non-accrual status. Comparably, non-performing loans amounted to $9,000 at December 31, 2021 consisting of one loan on non-accrual status. The non-performing loan at December 31, 2021 consisted of one one-to-four family residential non-owner occupied loan, and is generally well-collateralized or adequately reserved for. The non-performing loans at June 30, 2022 include one one-to-four family residential non-owner occupied loan and one multi-family residential loan, and both are generally well-collateralized or adequately reserved for. The allowance for loan losses as a percent of total loans receivable, net was 1.18% at June 30, 2022 and 1.29% at December 31, 2021.

Non-Interest Income. Non-interest income increased $1.8 million, or 71.0%, from $2.5 million for the three months ended June 30, 2021 to $4.3 million for the three months ended June 30, 2022. The increase was primarily attributable to a $1.5 million, or 114.1%, increase in net gain on loans held for sale, a $302,000, or 57.9%, increase in mortgage banking, equipment lending, and title abstract fees, a $31,000, or 60.8%, increase in other fees and service charges, and a $31,000, or 93.9%, increase in real estate commissions, net. The increase in net gain on loans held for sale was primarily due to the sale of $75.3 million of equipment loans during the three months ended June 30, 2022. These increases were partially offset by a $45,000, or 100.0%, decrease in gain on sale of investment securities available for sale, a $32,000, or 48.5%, decrease in gain on sale of SBA loans, and a $20,000, or 6.1%, decrease in net loan servicing income.

Non-Interest Expense. Total non-interest expense increased $1.8 million, or 36.3%, from $4.8 million for the three months ended June 30, 2021 to $6.6 million for the three months ended June 30, 2022, primarily due to a $1.5 million, or 42.2%, increase in salaries and employee benefits expense, a $171,000, or 53.6%, increase in other expense, a $79,000, or 20.4%, increase in occupancy and equipment expense, a $40,000, or 54.8%, increase in FDIC deposit insurance assessment, a $32,000, or 26.2%, increase in advertising expense, a $12,000, or 20.0%, increase in Directors’ fees and expenses, and a $10,000, or 4.6%, increase in professional fees. The increase in salaries and employee benefits is primarily due to expanding and improving the level of staff at the Bank and its subsidiary companies, including Oakmont. Oakmont’s results for the three months ended June 30, 2022 also contributed to the increases in occupancy and equipment expense, professional fees, advertising expense, and other expense. The increase in non-interest expense was partially offset by a $39,000, or 19.3%, decrease in data processing expense, and a $3,000, or 100.0%, decrease in other real estate owned expenses.

Provision for Income Tax. The provision for income tax increased $91,000, or 16.1%, from $567,000 for the three months ended June 30, 2021 to $658,000 for the three months ended June 30, 2022 due primarily to the increase in pre-tax income.

Comparison of Operating Results for the Six Months Ended June 30, 2022 and 2021

General. Net income amounted to $4.0 million for the six months ended June 30, 2022, an increase of $1.5 million, or 58.3%, compared to net income of $2.5 million for the six months ended June 30, 2021. The increase in net income on a comparative six-month basis was primarily the result of an increase in non-interest income of $4.5 million, and an increase in net interest income of $2.9 million, partially offset by an increase in non-interest expense of $3.2 million, an increase in the provision for loan losses of $576,000, and an increase in the provision for income taxes of $528,000.

Net Interest Income. Net interest income increased $2.9 million, or 34.9% to $11.3 million for the six months ended June 30, 2022 from $8.4 million for the six months ended June 30, 2021. The increase was driven by a $2.9 million, or 27.5%, increase in interest income, partially offset by a $27,000, or 1.1%, decrease in interest expense.

Interest Income. The $2.9 million, or 27.5%, increase in interest income for the six months ended June 30, 2022 over the comparable period in 2021 was primarily due to an $85.8 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of $473.5 million for the six months ended June 30, 2021 to an average balance of $559.3 million for the six months ended June 30, 2022, and had the effect of increasing interest income $1.9 million. Also contributing to the increase in interest income was a 40 basis point increase in the yield on average loans receivable, net, including loans held for sale, which increased from 4.43% for the six months ended June 30, 2021 to 4.83% for the six months ended June 30, 2022, and had the effect of increasing interest income $1.1 million. Contributing to both the increase in average balance of loans receivable, net and yield was the purchase of a $55.5 million commercial real estate loan portfolio by Oakmont Commercial, LLC in April, 2022.

Interest Expense. The $27,000, or 1.1%, increase in interest expense was primarily attributable to a $26.2 million increase in average FHLB short-term borrowings which increased from $1.5 million for the six months ended June 30, 2021 to $27.7 million for the six months ended June 30, 2022, and had the effect of increasing interest expense by $113,000. Also contributing to the increase in interest expense was a $73.0 million increase in average money market accounts which increased from an average balance of $153.7 million for the six months ended June 30, 2021 to an average balance of $226.7 million for the six months ended June 30, 2022, and had the effect of increasing interest expense by $251,000. The increase in money market average balance was impacted by a $150.0 million deposit in May, 2022 through a deposit placement agreement with a third party bank. This increase in money market interest expense was partially offset by a 15nine basis point decrease in the rate on average money market accounts, which decreased from ~~0.80% to 0.65%~~0.69% for the ~~three~~six months ended June 30, 2021 to 0.60% for the six months ended June 30, 2022, and had the effect of decreasing interest expense by ~~$69,000.~~$97,000. This increase in interest expense was partially offset by a 31 basis point decrease in the rate on average certificate of deposit accounts, which decreased from 1.23% for the six months ended June 30, 2021 to 0.92% for the six months ended June 30, 2022, and had the effect of decreasing interest expense by $287,000. The average interest rate spread increased from ~~2.53%~~2.96% for the ~~three~~six months ended June 30, ~~2020~~2021 to ~~3.28%~~3.57% for the ~~three~~six months ended June 30, ~~2021~~2022 while the net interest margin increased from ~~2.92%~~3.18% for the ~~three~~six months ended June 30, ~~2020~~2021 to ~~3.50%~~3.73% for the ~~three~~six months ended June 30, ~~2021.~~2022.

4044

Three Months Ended June 30,
2021 2020

Average
Balance
Interest
Average
Yield/
Rate

Average
Balance
Interest
Average
Yield/
Rate

(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing
$ 40,420 $ 8 0.08 % $ 27,997 $ 6 0.09 %
Investment in interest-earning time deposits
7,965 51 2.56 9,922 61 2.46
Investment securities available for sale
6,075 30 1.98 8,245 54 2.62
Loans receivable, net (1) (2)
485,787 5,735 4.72 316,506 3,891 4.92
Investment in FHLB stock
1,274 19 5.97 1,344 21 6.25
Total interest-earning assets
541,521 5,843 4.32 % 364,014 4,033 4.43 %
Non-interest-earning assets
15,234 15,743
Total assets
$ 556,755 $ 379,757
Interest-bearing liabilities:

Passbook accounts
$ 11 $ - * % $ 6 $ - * %
Savings accounts
1,536 1 0.26 1,921 1 0.21
Money market accounts
178,052 289 0.65 33,986 68 0.80
Certificate of deposit accounts
174,909 502 1.15 191,609 1,000 2.09
Total deposits
354,508 792 0.89 227,522 1,069 1.88
FHLB short-term borrowings
- - - - 1 -
FHLB long-term borrowings
26,424 129 1.95 29,908 153 2.05
FRB long-term borrowings
34,245 29 0.34 24,211 23 -
Subordinated debt
7,910 130 6.57 7,876 130 6.60
Other short-term borrowings
2,133 26 4.88 - - -
Total interest-bearing liabilities
425,220 1,106 1.04 % 289,517 1,376 1.90 %
Non-interest-bearing liabilities
104,345 63,933
Total liabilities
529,565 353,450
Stockholders’ Equity
27,190 26,307
Total liabilities and Stockholders’ Equity
$ 556,755 $ 379,757
Net interest-earning assets
$ 116,301 $ 74,496
Net interest income; average interest rate spread
$ 4,737 3.28 % $ 2,657 2.53 %
Net interest margin (3)
3.50 % 2.92 %
Average interest-earning assets to average interest-bearing liabilities
127.35 % 125.73 %

	Six Months Ended June 30,
	2022							2021
					Average							Average
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
	(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing	$	31,363	$	44		0.28	%	$	35,766	$	19		0.11	%
Investment in interest-earning time deposits		7,255		62		1.71			8,275		109		2.63
Investment securities available for sale		3,808		17		0.89			7,604		84		2.21
Loans receivable, net (1) (2)		559,307		13,500		4.83			473,487		10,478		4.43
Investment in FHLB stock		3,448		58		3.36			1,398		42		6.01
Total interest-earning assets		605,181		13,681		4.52	%		526,530		10,732		4.08	%
Non-interest-earning assets		17,865							15,171
Total assets	$	623,046						$	541,701
Interest-bearing liabilities:
Passbook accounts	$	7	$	-		*	%	$	10	$	-		*	%
Savings accounts		1,702		2		0.24			1,524		2		0.26
Money market accounts		226,724		681		0.60			153,717		528		0.69
Certificate of deposit accounts		184,112		844		0.92			185,376		1,138		1.23
Total deposits		412,545		1,527		0.74			340,627		1,668		0.98

FHLB short-term borrowings		27,656		75	0.54			1,492		6	0.80
FHLB long-term borrowings		51,281		501	1.95			27,303		268	1.96
FRB long-term borrowings		2,613		4	0.31			40,284		69	0.34
Subordinated debt		7,940		260	6.55			7,906		260	6.58
Other short-term borrowings		229		27	23.58			5,052		96	3.80
Total interest-bearing liabilities		502,264		2,394	0.95	%		422,664		2,367	1.12	%
Non-interest-bearing liabilities		83,323						92,642
Total liabilities		585,587						515,306
Stockholders’ Equity		37,459						26,395
Total liabilities and Stockholders’ Equity	$	623,046					$	541,701
Net interest-earning assets	$	102,917					$	103,866
Net interest income; average interest rate spread			$	11,287	3.57	%			$	8,365	2.96	%
Net interest margin (3)					3.73	%					3.18	%
Average interest-earning assets to
average interest-bearing liabilities					120.49	%					124.57	%

________________________

* Not meaningful.

*	~~Not meaningful.~~

~~(1)~~

~~Includes loans held for sale.~~

~~(2)~~

~~Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for loan losses.~~

~~(3)~~

(1) Includes loans held for sale.

(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for loan losses.

(3) Equals net interest income divided by average interest-earning assets.

Provision for Loan Losses. The Company’s provision for loan losses increased ~~$143,000,~~$576,000, or ~~46.9%~~82.1%, to ~~$448,000~~$1.3 million for the ~~three~~six months ended June 30, ~~2021~~2022 from ~~$305,000~~$702,000 for the ~~three~~six months ended June 30, ~~2020.~~2021. The increase in the provision for loan losses for the ~~three~~six months ended June 30, ~~2021~~2022 over the ~~three~~six months ended June 30, ~~2020~~2021 was based on an evaluation of the allowance relative to such factors as volume of the loan portfolio, concentrations of credit risk, prevailing economic conditions, ~~which includes the impact of the COVID-19 pandemic,~~ prior loan loss experience and amount of non-performing loans at June 30, ~~2021.~~2022.

Non-performing loans amounted to ~~$9,000~~$1.7 million, or 0.32%, of net loans receivable at June 30, ~~2021,~~2022, consisting of ~~one 1-4 family non-owner occupied residential loan, which is~~two loans on non-accrual status. Comparably, non-performing loans amounted to ~~$643,000 or 0.18% of net loans receivable~~$9,000 at December 31, ~~2020,~~2021 consisting of ~~five loans, two loans of which were~~one loan on non-accrual ~~status~~status. The non-performing loan at December 31, 2021 consisted of one one-to-four family residential non-owner occupied loan, and ~~three~~is generally well-collateralized or adequately reserved for. The non-performing loans ~~were 90 days~~at June 30, 2022 include one one-to-four family residential non-owner occupied loan and one multi-family residential loan, and both are generally well-collateralized or ~~more past due and accruing interest.~~adequately reserved for. The allowance for loan losses as a percent of total loans receivable, net was ~~0.99%~~1.18% at June 30, ~~2021~~2022 and ~~0.85%~~1.29% at December 31, ~~2020. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 1.39% at June 30,~~ 2021.

Non-Interest Income.Non-interest income increased ~~$1.2~~$4.5 million, or ~~85.2%~~85.7%, from ~~$1.4~~$5.3 million for the ~~three~~six months ended June 30, ~~2020~~2021 to ~~$2.5~~$9.8 million for the ~~three~~six months ended June 30, ~~2021.~~2022. The increase was primarily attributable to a ~~$509,000,~~$4.5 million, or ~~61.6%~~177.2%, increase in net gain on loans held for sale, a ~~$328,000 increase in loan servicing income, a $171,000,~~$408,000, or ~~48.7%~~38.7%, increase in mortgage banking, equipment lending, and title abstract fees, a ~~$100,000,~~$75,000, or ~~204.1%~~43.4%, increase in other fees and service charges, a ~~$45,000~~$61,000, or 95.3%, increase in real estate commissions, net, and a $15,000, or 6.3%, increase in insurance commissions. The increase in net gain on loans held for sale was primarily due to the sale of $183.2 million of equipment loans during the six months ended June 30, 2022. These increases were partially offset by a $362,000, or 100.0%, decrease in gain on sale of investment securities available for sale, a ~~$14,000,~~$100,000, or ~~26.9%~~37.5%, ~~increase~~decrease in gain on ~~sales from~~sale of SBA loans, ~~a $13,000, or 10.8%, increase in insurance commissions~~ and a ~~$3,000,~~$77,000, or ~~10.0%~~14.0%, increase in real estate sales commissions, net. Oakmont’s results for the three months ended June 30, 2021 accounted for $421,000 of the increase in net gain on loans held for sale, $328,000 of the increase in loan servicing income, $200,000 of the increase in mortgage banking, equipment lending, and title abstract fees, and $18,000 of the increase in other fees. These increases were partially offset by an $18,000 decrease in net ~~gains on sale and write-downs of other real estate owned.~~loan servicing income.

Non-Interest Expense. Total non-interest expense increased ~~$2.1~~$3.2 million, or ~~79.4%~~33.7%, from ~~$2.7~~$9.6 million for the ~~three months ended June 30, 2020 to $4.8 million for the three~~six months ended June 30, 2021 to $12.8 million for the six months ended June 30, 2022, primarily due to a ~~$1.7~~$2.6 million, or ~~92.8%~~38.6%, increase in salaries and employee benefits expense, a ~~$169,000,~~$225,000, or ~~77.5%~~34.7%, increase in other expense, a $135,000, or 59.5%, increase in advertising expense, a $122,000, or 16.0%, increase in occupancy and equipment expense, a $105,000, or ~~92.9%, increase in professional fees, a $73,000, or 29.7%, increase in other expense, a $47,000, or 62.7%, increase in advertising expense, a $46,000, or 170.4%~~84.7%, increase in FDIC deposit insurance assessment, a ~~$42,000,~~$31,000, or ~~26.3%~~8.1%, increase in ~~data processing expense,~~professional fees, and ~~an $8,000,~~a $15,000, or ~~15.4%~~11.7%, increase in Directors’ fees and expenses. The increase in salaries and employee benefits is primarily due to generally expanding and improving the level of staff at the Bank and its subsidiary companies, including Oakmont. Oakmont’s results for the three months ended June 30, 2021 accounted for $930,000 of the increase in salaries and employee benefits expense, $86,000 of the increase in occupancy and equipment expense, $68,000 of the increase in professional fees, $47,000 of the increase in advertising expense, and $19,000 of the increase in other expense. The increase in non-interest expense was partially offset by a $5,000, or 62.5%, decrease in other real estate owned expense.

~~Provision for Income Tax.~~ The provision for income tax increased $273,000, or 92.9%, from $294,000 for the three months ended June 30, 2020 to $567,000 for the three months ended June 30, 2021 due primarily to the increase in pre-tax income.

~~Comparison of Operating Results for the Six Months Ended June 30, 2021 and 2020~~

~~General.~~ Net income amounted to $2.5 million for the six months ended June 30, 2021, an increase of $1.4 million, or 118.3%, compared to net income of $1.2 million for the six months ended June 30, 2020. The increase in net income was primarily the result of an increase in net interest income of $3.5 million and an increase in non-interest income of $2.6 million, partially offset by an increase in non-interest expense of $4.0 million, an increase in the provision for income taxes of $521,000, and an increase in the provision for loan losses of $282,000.

~~Net Interest Income.~~ Net interest income increased $3.5 million, or 70.7%, to $8.4 million for the six months ended June 30, 2021 from $4.9 million for the six months ended June 30, 2020. The increase was driven by a $3.0 million, or 39.3%, increase in interest income and a $437,000, or 15.6%, decrease in interest expense.

~~Interest Income.~~ The $3.5 million or 70.7% increase in net interest income for the six months ended June 30, 2021 over the comparable period in 2020 was driven by a $3.0 million, or 39.3%, increase in interest income. The increase in interest income was primarily due to a $187.4 million increase in average loans receivable, net, including loans held for sale, which increased from an average balance of $286.1 million for the six months ended June 30, 2020 to an average balance of $473.5 million for the six months ended June 30, 2021, and had the effect of increasing interest income $3.1 million. Also contributing to the increase in interest income on loans receivable, net, is a $1.8 million increase in amortization of deferred loan fees for the six months ended June 30, 2021, $1.7 million of which is attributable to PPP loan forgiveness. This increase in interest income was partially offset by a 72 basis point decrease in the yield on average loans receivable, net, including loans held for sale, which decreased from 5.15% for the three months ended June 30, 2020 to 4.43% for the six months ended June 30, 2021, and had the effect of decreasing interest income $1.7 million. The decline in loan yield is primarily the result of lower yielding PPP loans funded from the second quarter of 2020 through the second quarter of 2021 and the impact of the Federal Reserve’s 150 basis point rate cuts in March 2020.

~~Interest Expense.~~ The $437,000, or 15.6%, decrease in interest expense was primarily attributable to a 94 basis point decrease in rate on average certificate of deposit accounts, which decreased from 2.17% for the six months ended June 30, 2020 to 1.23% for the six months ended June 30, 2021, and had the effect of decreasing interest expense by $878,000. Interest expense on deposits continues to be actively managed to lower our cost of funds. Also contributing to this decrease was a $4.7 million decrease in average certificate of deposit accounts which decreased from an average balance of $190.1 million for the six months ended June 30, 2020 to an average balance of $185.4 million for the six months ended June 30, 2021, and had the effect of decreasing interest expense $51,000. This decrease in interest expense was partially offset by a $123.6 million increase in average money market accounts which increased from an average balance of $30.1 million for the six months ended June 30, 2020 to an average balance of $153.7 million for the six months ended June 30, 2021, and had the effect of increasing interest expense by $496,000. This increase in money market interest expense was partially offset by an 11 basis point decrease in the rate on average money market accounts, which decreased from 0.80% for the six months ended June 30, 2020 to 0.69% for the six months ended June 30, 2021, and had the effect of decreasing interest expense by $89,000. The decrease in interest expense was also partially offset by an increase in average other short-term borrowings of $5.1 million which had the effect of increasing interest expense by $96,000. The average interest rate spread increased from 2.68% for the six months ended June 30, 2020 to 2.96% for the six months ended June 30, 2021 while the net interest margin increased from 3.02% for the six months ended June 30, 2020 to 3.18% for the six months ended June 30, 2021.

~~Average Balances, Net Interest Income, Yields Earned and Rates Paid.~~ The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

Six Months Ended June 30,
2021 2020

Average
Balance
Interest
Average
Yield/
Rate

Average
Balance
Interest
Average
Yield/
Rate

(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-bearing
$ 35,766 $ 19 0.11 % $ 19,600 $ 66 0.67 %
Investment in interest-earning time deposits
8,275 109 2.63 9,990 124 2.48
Investment securities available for sale
7,604 84 2.21 7,892 101 2.56
Loans receivable, net (1) (2)
473,487 10,478 4.43 286,138 7,363 5.15
Investment in FHLB stock
1,398 42 6.01 1,381 50 7.24
Total interest-earning assets
526,530 10,732 4.08 % 325,001 7,704 4.74 %
Non-interest-earning assets
15,171 14,274
Total assets
$ 541,701 $ 339,275
Interest-bearing liabilities:

Passbook accounts
$ 10 $ - * % $ 6 $ - * %
Savings accounts
1,524 2 0.26 1,863 2 0.21
Money market accounts
153,717 528 0.69 30,138 121 0.80
Certificate of deposit accounts
185,376 1,138 1.23 190,081 2,067 2.17
Total deposits
340,627 1,668 0.98 222,088 2,190 1.97
FHLB short-term borrowings
1,492 6 0.80 1,978 31 3.13
FHLB long-term borrowings
27,303 268 1.96 28,779 300 2.08
FRB long-term borrowings
40,284 69 0.34 12,106 23 0.38
Subordinated debt
7,906 260 6.58 7,872 260 6.61
Other short-term borrowings
5,052 96 3.80 - - -
Total interest-bearing liabilities
422,664 2,367 1.12 % 272,823 2,804 2.06 %
Non-interest-bearing liabilities
92,642 40,266
Total liabilities
515,306 313,089
Stockholders’ Equity
26,395 26,186
Total liabilities and Stockholders’ Equity
$ 541,701 $ 339,275
Net interest-earning assets
$ 103,866 $ 52,178
Net interest income; average interest rate spread
$ 8,365 2.96 % $ 4,900 2.68 %
Net interest margin (3)
3.18 % 3.02 %
Average interest-earning assets to average interest-bearing liabilities
124.57 % 119.13 %

*	~~Not meaningful.~~

~~(1)~~

~~Includes loans held for sale.~~

~~(2)~~

~~Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for loan losses.~~

~~(3)~~

~~Equals net interest income divided by average interest-earning assets.~~

~~Provision for Loan Losses.~~ The Company’s provision for loan losses increased $282,000, or 67.1%, to $702,000 for the six months ended June 30, 2021 from $420,000 for the six months ended June 30, 2020. The increase in the provision for loan losses for the six months ended June 30, 2021 over the six months ended June 30, 2020 was based on an evaluation of the allowance relative to such factors as volume of the loan portfolio, concentrations of credit risk, prevailing economic conditions, which includes the impact of the COVID-19 pandemic, prior loan loss experience and amount of non-performing loans at June 30, 2021.

Non-performing loans amounted to $9,000 at June 30, 2021, consisting of one 1-4 family non-owner occupied residential loan, which is on non-accrual status. Comparably, non-performing loans amounted to $643,000 or 0.18% of net loans receivable at December 31, 2020, consisting of five loans, two loans of which were on non-accrual status and three loans were 90 days or more past due and accruing interest. The allowance for loan losses as a percent of total loans receivable, net was 0.99% at June 30, 2021 and 0.85% at December 31, 2020. Excluding PPP loans, which are 100% guaranteed by the SBA, the allowance for loan losses to total loans was 1.39% at June 30, 2021.

~~Non-Interest Income.~~ Non-interest income increased $2.6 million, or 98.1%, from $2.7 million for the six months ended June 30, 2020 to $5.3 million for the six months ended June 30, 2021. The increase was primarily attributable to a $943,000, or 58.7%, increase in net gain on loans held for sale, a $551,000 increase in loan servicing income, a $408,000, or 63.3%, increase in mortgage banking, equipment lending, and title abstract fees, a $362,000 gain on sale of investment securities available for sale, a $215,000, or 413.5%, increase in gain on sales from SBA loans, a $139,000, or 408.8%, increase in other fees and service charges, and a $23,000, or 10.6%, increase in insurance commissions. Oakmont’s results for the six months ended June 30, 2021 accounted for $1.0 million of the increase in net gain on loans held for sale, $551,000 of the increase in loan servicing income, $395,000 of the increase in mortgage banking, equipment lending, and title abstract fees, and $27,000 of the increase in other fees. The increase in other fees and service charges was primarily due to the increase in loan prepayment fees. These increases were partially offset by an $18,000 decrease in net gains on sale and write-downs of other real estate owned.

~~Non-Interest Expense.~~ Total non-interest expense increased $4.0 million, or 73.0%, from $5.5 million for the six months ended June 30, 2020 to $9.6 million for the six months ended June 30, 2021, primarily due to a $3.1 million, or 81.7%, increase in salaries and employee benefits expense, a $341,000, or 80.6%, increase in occupancy and equipment expense, a $193,000, or 42.4%, increase in other expense, a $154,000, or 67.8%, increase in professional fees, a $110,000, or 37.0%, increase in data processing expense, a $77,000, or 51.3%, increase in advertising expense, a $77,000, or 163.8%, increase in FDIC deposit insurance assessment, and a $14,000, or 12.3%, increase in Directors’ fees and expenses. The increase in salaries and employee benefits is primarily due to generally expanding and improving the level of staff at the Bank and its subsidiary companies, including Oakmont. Oakmont’s results for the six months ended June 30, ~~2021 accounted for $1.8 million of~~2022 also contributed to the ~~increase in salaries and employee benefits expense, $164,000 of the increase~~increases in occupancy and equipment expense, ~~$92,000 of the increase in~~ professional fees, ~~$79,000 of the increase in other~~advertising expense, and ~~$77,000 of the increase in advertising~~other expense. The increase in non-interest expense was partially offset by a ~~$10,000,~~$47,000, or ~~45.5%~~11.5%, decrease in data processing expense, and a $12,000, or 100.0%, decrease in other real estate owned ~~expense.~~expenses.

Provision for Income Tax.The provision for income tax increased ~~$521,000,~~$528,000, or ~~110.9%~~53.3%, from ~~$470,000 for the six months ended June 30, 2020 to~~ $991,000 for the six months ended June 30, 2021 to $1.5 million for the six months ended June 30, 2022 due primarily to the increase in pre-tax income.

Operating Segments

The Company's operations consist of two reportable operating segments: Banking and Mortgage Banking. Our Banking Segment generates revenues primarily from its lending, deposit gathering and fee business activities. Our Mortgage Banking Segment originates residential mortgage loans which are sold into the secondary market along with the loans’ servicing rights. Detailed segment information appears in Note 12 in the Notes to Unaudited Consolidated Financial Statements.

Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the three months ended June 30, ~~2021~~2022 of ~~$1.7~~$3.0 million, a ~~$1.2~~$1.3 million, or ~~202.3%~~73.9%, increase from the same period in ~~2020.~~2021. This increase in PTSP was primarily due to a ~~$2.1~~$2.2 million, or ~~77.9%~~145.1%, increase in non-interest income, and a $1.0 million or 21.0%, increase in net interest ~~income and a $1.1 million, or 275.9%, increase in non-interest~~ income. ~~This increase was~~These increases were partially offset by a ~~$1.9~~$1.8 million, or ~~85.8%~~42.6%, increase in non-interest expense, and a ~~$143,000,~~$151,000, or ~~46.9%~~33.7% increase in the provision for loan losses. The increase in non-interest income was primarily due to a ~~$421,000~~$1.8 million increase in the gain on the sale of equipment loans, ~~$328,000 in loan servicing income,~~and a ~~$194,000,~~$403,000, or ~~93.3%~~100.2%, increase in equipment lending and title abstract fees, ~~and~~partially offset by a $45,000, or 100.0%, decrease in gain on ~~the~~ sale of investment securities available for sale. The increase in non-interest expense was primarily due to a $1.5 million, or ~~100.3%~~49.5%, increase in salaries and employee benefits expense, a ~~$160,000,~~$156,000, or ~~105.3%~~53.1% increase in other expenses, a $79,000, or 25.3%, increase in occupancy and equipment expense, and a ~~$65,000,~~$40,000, or ~~28.4%~~54.8%, increase in ~~other expenses.~~FDIC deposit insurance assessment expense.

4546

Our Mortgage Banking Segment reported a pre-tax segment ~~profit~~loss (“~~PTSP”~~PTSL”) for the three months ended June 30, ~~2021~~2022 of ~~$262,000,~~$49,000, a ~~$192,000,~~$311,000, or ~~42.3%~~118.7%, decrease from the same period in ~~2020.~~2021. The decrease in ~~PTSP~~PTSL was primarily due to a ~~$235,000,~~$379,000, or ~~49.5%~~36.7%, decrease in non-interest income partially offset by a $65,000, or 104.8%, increase in ~~non-interest expense,~~net interest income, and a ~~$22,000,~~$3,000, or ~~55.0%~~0.4%, decrease in non-interest expense. The decrease in non-interest income was primarily due to a $278,000, or 30.4%, decrease net ~~interest income.~~gain on loans held for sale, and a $101,000, or 84.2%, decrease in mortgage banking fees. The ~~increase~~decrease in non-interest expense was primarily due to a ~~$185,000, or 58.0%~~$43,000, 57.3%, ~~increase in salaries and employee benefits, and a $33,000, or 78.6%, increase~~decrease in data ~~processing. The decrease in PTSP was~~processing, partially offset by a ~~$65,000,~~$20,000, or ~~6.7%~~153.8%, increase in ~~non-interest income. The~~advertising expense, and a $15,000, or 60.0%, increase in other non-interest income was primarily due to an $88,000, or 10.7% increase in net gain on loans held for sale, and was partially offset by a $23,000, or 16.1% decrease in mortgage banking, equipment lending and title abstract fees.expenses.

Our Banking Segment reported a pre-tax segment profit (“PTSP”) for the six months ended June 30, ~~2021~~2022 of ~~$3.3~~$7.3 million, a ~~$2.5~~$4.0 million, or ~~333.6%~~124.5%, increase from the same period in ~~2020.~~2021. This increase in PTSP was primarily due to a ~~$3.6~~$5.1 million, or ~~71.3%~~141.6%, increase in ~~net interest~~non-interest income, and a $2.8 million, or ~~361.9%~~32.4%, increase in ~~non-interest~~net interest income. ~~This increase was~~These increases were partially offset by a ~~$3.6~~$3.2 million, or ~~77.9%~~39.3%, increase in non-interest expense, and a ~~$282,000,~~$576,000, or ~~67.1%~~82.1% increase in the provision for loan losses. The increase in non-interest income was primarily due to a ~~$1.0~~$5.5 million, or 526.4%, increase in gain on the sale of equipment loans, a ~~$551,000~~$75,000, or 43.4%, increase in other fees and service charges, and a $61,000, or 95.3%, increase in real estate sales commissions, net, partially offset by a $362,000, or 100.0%, decrease in gain on sale of investment securities available for sale, a $100,000, or 37.5% decrease in gain on sale of SBA loans, a $77,000, or 14.0%, decrease in net loan servicing income, and a ~~$486,000,~~$48,000, or ~~138.1%~~5.7%, ~~increase~~decrease in equipment lending and title abstract ~~fees, and a $362,000 gain on the sale of investment securities available for sale.~~fees. The increase in non-interest expense was primarily due to a ~~$2.7~~$2.6 million, or ~~87.1%~~44.6%, increase in salaries and employee benefits expense, a ~~$323,000,~~$212,000 or ~~112.5%~~35.2%, increase in other expenses, a $133,000, or 21.8%, increase in occupancy and equipment expense, a $105,000, or 84.7% increase in FDIC deposit insurance assessment, and a ~~$179,000,~~$97,000, or ~~42.2%~~48.5%, increase in ~~other expenses.~~advertising expense.

Our Mortgage Banking Segment reported a pre-tax segment ~~profit~~loss (“~~PTSP”~~PTSL”) for the six months ended June 30, ~~2021~~2022 of ~~$157,000,~~$223,000, a ~~$726,000,~~$380,000, or ~~82.2%~~242.0%, decrease from the same period in ~~2020.~~2021. The decrease in ~~PTSP~~PTSL was primarily due to a ~~$457,000,~~$527,000, or ~~49.1%~~30.6%, decrease in non-interest income, partially offset by a $153,000, or 86.9%, increase in net interest income, and a $6,000, or 0.4%, increase in non-interest ~~expense, a $180,000, or 9.5% decrease in non-interest income, and an $89,000, or 102.3% decrease in net-interest income.~~expense. The decrease in non-interest income was primarily due to a ~~$102,000, or 6.3%~~$983,000, 65.3%, decrease in net gain on loans held for ~~sale.~~sale, partially offset by a $456,000, or 212.1%, increase in mortgage banking and title abstract fees. The increase in non-interest expense was primarily due to a ~~$346,000, 54.9%~~$38,000, or 140.7%, increase in advertising expense, a $29,000, or 3.0%, increase in salaries and employee benefits, ~~and~~ a ~~$79,000,~~$16,000, or ~~111.3%~~45.7%, increase in professional fees and a $13,000, or 28.9%, increase in other non-interest expense, partially offset by a $79,000, 52.7%, decrease in data ~~processing.~~processing and an $11,000, or 7.1%, decrease in occupancy and equipment expense.

Liquidity and Capital Resources

The Company’s primary sources of funds are deposits, amortization and prepayment of loans and to a lesser extent, loan sales and other funds provided from operations. While scheduled principal and interest payments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company sets the interest rates on its deposits to maintain a desired level of total deposits. In addition, the Company invests excess funds in short-term interest-earning assets that provide additional liquidity. At June 30, ~~2021,~~2022, the Company's cash and cash equivalents amounted to ~~$18.9~~$78.9 million. At such date, the Company also had ~~$3.8~~$5.8 million invested in interest-earning time deposits maturing in one year or less.

The Company uses its liquidity to fund existing and future loan commitments, to fund deposit outflows, to invest in other interest-earning assets and to meet operating expenses. At June 30, ~~2021,~~2022, Quaint Oak Bank had outstanding commitments to originate loans of ~~$22.8~~$25.3 million, commitments under unused lines of credit of ~~$39.0~~$51.3 million, and ~~$6.4~~$3.3 million under standby letters of credit.

At June 30, ~~2021,~~2022, certificates of deposit scheduled to mature in one year or less totaled ~~$51.7~~$79.3 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.

In addition to cash flow from loan payments and prepayments and deposits, the Company has significant borrowing capacity available to fund liquidity needs. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Pittsburgh (FHLB), which provide an additional source of funds. As of June 30, ~~2021,~~2022, we had ~~$34.2~~$99.2 million of borrowings from the FHLB and had ~~$176.2~~$283.5 million in borrowing capacity. Under terms of the collateral agreement with the FHLB of Pittsburgh, we pledge residential mortgage loans as well as Quaint Oak Bank’s FHLB stock as collateral for such advances. In addition, as of June 30, ~~2021~~2022 Quaint Oak Bank had ~~$1.1 million~~$461,000 in borrowing capacity with the Federal Reserve Bank of Philadelphia. There were no borrowings under this facility at June 30, ~~2021. The Bank also has borrowing capacity with the FRB under the PPPLF program in the amount of outstanding pledged PPP loans.~~2022. Oakmont Capital Holdings, LLC has two lines of credit with a credit union which are used to fund equipment loans totaling $11.0 million at June 30, ~~2021.~~2022. As of June 30, ~~2021,~~2022, there were ~~$1.2 million of~~no outstanding balances on these two lines of credit.

Total stockholders’ equity increased ~~$4.5~~$5.3 million, or ~~15.6%~~14.3%, to ~~$33.2~~$42.2 million at June 30, ~~2021~~2022 from ~~$28.7~~$36.9 million at December 31, ~~2020.~~2021. Contributing to the increase was ~~noncontrolling interest of $2.2 million,~~ net income for the six months ended June 30, ~~2021~~2022 of ~~$2.5~~$4.0 million, net income attributable to noncontrolling interest of $1.5 million, common stock earned by participants in the employee stock ownership plan of ~~$122,000, the reissuance of treasury stock for exercised stock options of $87,000,~~$175,000, amortization of stock awards and options under our stock compensation plans of $84,000, ~~and~~ the reissuance of treasury stock under the Bank’s 401(k) Plan of ~~$33,000.~~$33,000 and the reissuance of treasury stock for exercised stock options of $148,000. These increases were partially offset by dividends paid of ~~$398,000, net loss attributable to~~$485,000, noncontrolling interest distribution of ~~$121,000,~~$176,000, other comprehensive loss, net of ~~$84,000,~~$41,000, and the purchase of treasury stock of ~~$25,000.~~$28,000. For further discussion of the stock compensation plans, see Note 10 in the Notes to Unaudited Consolidated Financial Statements contained elsewhere herein.

Quaint Oak Bank is required to maintain regulatory capital sufficient to meet tier 1 leverage, common equity tier 1 capital, tier 1 risk-based and total risk-based capital ratios of at least 4.00%, 4.50%, 6.00%, and 8.00%, respectively. At June 30, ~~2021,~~2022, Quaint Oak Bank exceeded each of its capital requirements with ratios of ~~7.21%~~6.38%, ~~11.39%~~8.18%, ~~11.39%~~8.18% and ~~12.56%~~9.35%, respectively. As a small savings and loan holding company eligible for exemption, the Company is not currently subject to any regulatory capital requirements.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers' requests for funding and take the form of loan commitments and lines of credit. Our exposure to credit loss from non-performance by the other party to the above-mentioned financial instruments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. In general, we do not require collateral or other security to support financial instruments with off–balance sheet credit risk.

Commitments. At June 30, ~~2021,~~2022, we had unfunded commitments under lines of credit of ~~$39.0~~$51.3 million, ~~$22.8~~$25.3 million of commitments to originate loans, and ~~$6.4~~$3.3 million under standby letters of credit. We had no commitments to advance additional amounts pursuant to outstanding lines of credit or undisbursed construction loans.

Impact of Inflation and Changing Prices

The consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Not Applicable.

~~ITEM 4.~~

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, ~~2021.~~2022. Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the second fiscal quarter of fiscal ~~2020~~2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1.

LEGAL PROCEEDINGS

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company.

ITEM 1A.

RISK FACTORS

The COVID-19 pandemic has adversely impacted our ability to conduct business and is expected to adversely impact our financial results and those of our customers. The ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.Not applicable.

The COVID-19 pandemic has significantly adversely affected our operations and the way we provide banking services to businesses and individuals, most of whom are currently under government issued stay-at-home orders. As an essential business, we continue to provide banking and financial services to our customers in an environment compliant with federal and state COVID-19 guidelines. In addition, we continue to provide access to banking and financial services through online banking, ATMs and by telephone. If the COVID-19 pandemic worsens it could limit or disrupt our ability to provide banking and financial services to our customers.

In response to the stay-at-home orders, the majority of our employees currently are working remotely to enable us to continue to provide banking services to our customers. Heightened cybersecurity, information security and operational risks may result from these remote work-from-home arrangements. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to the effects and restrictions of the COVID-19 pandemic. We also rely upon our third-party vendors to conduct business and to process, record and monitor transactions. If any of these vendors are unable to continue to provide us with these services, it could negatively impact our ability to serve our customers. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective. There is pervasive uncertainty surrounding the future economic conditions that will emerge in the months and years following the start of the pandemic. As a result, management is confronted with a significant and unfamiliar degree of uncertainty in estimating the impact of the pandemic on credit quality, revenues and asset values. To date, the COVID-19 pandemic has resulted in declines in loan demand and loan originations, other than through government sponsored programs such as the Paycheck Protection Program, deposit availability, market interest rates and negatively impacted many of our business and consumer borrower’s ability to make their loan payments. Because the length of the pandemic and the efficacy of the extraordinary measures being put in place to address its economic consequences are unknown, including recent reductions in the targeted federal funds rate, until the pandemic subsides, we expect our net interest income and net interest margin will be adversely affected. Many of our borrowers have become unemployed or may face unemployment, and certain businesses are at risk of insolvency as their revenues decline precipitously, especially in businesses related to travel, hospitality, leisure and physical personal services. Businesses may ultimately not reopen as there is a significant level of uncertainty regarding the level of economic activity that will return to our markets over time, the impact of governmental assistance, the speed of economic recovery, the resurgence of COVID-19 in subsequent seasons and changes to demographic and social norms that will take place.

The impact of the pandemic is expected to continue to adversely affect us during 2020 and possibly longer as the ability of many of our customers to make loan payments has been significantly affected. Although the Company makes estimates of loan losses related to the pandemic as part of its evaluation of the allowance for loan losses, such estimates involve significant judgment and are made in the context of significant uncertainty as to the impact the pandemic will have on the credit quality of our loan portfolio. It is likely that increased loan delinquencies, adversely classified loans and loan charge-offs will increase in the future as a result of the pandemic. Consistent with guidance provided by banking regulators, we have modified loans by providing various loan payment deferral options to our borrowers affected by the COVID-19 pandemic. Notwithstanding these modifications, these borrowers may not be able to resume making full payments on their loans once the COVID-19 pandemic is resolved. Any increases in the allowance for credit losses will result in a decrease in net income and, most likely, capital, and may have a material negative effect on our financial condition and results of operations.

Even after the COVID-19 pandemic subsides, the U.S. economy will likely require some time to recover from its effects, the length of which is unknown, and during which we may experience a recession. As a result, we anticipate our business may be materially and adversely affected during this recovery.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~(a)~~

(a) Not applicable.

~~(b)~~

(b) Not applicable.

~~(c)~~

The Company’s repurchases of its common stock made during the quarter ended June 30, ~~2021~~2022 including stock-for-stock option exercises of outstanding stock options, are set forth in the table below:

Period

Total Number
of Shares
Purchased

Average
Price
Paid
per
Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plans or
Programs (1)

April 1, 2021 – April 30, 2021
- $ - - 24,375
May 1, 2021 – May 31, 2021
871 18.00 - 24,375
June 1, 2021 – June 30, 2021
251 18.25 - 24,375
Total
1,122 $ 18.05 - 24,375

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1, 2022 – April 30, 2022		-	$	-		-		24,375
May 1, 2022 – May 31, 2022		414		23.90		-		24,375
June 1, 2022 – June 30, 2022		157		24.10		-		24,375
Total		571	$	23.97		-		24,375

Notes to this table:

~~(1)~~

(1) On December 12, 2018, the Board of Directors of Quaint Oak Bancorp approved its fifth share repurchase program which provides for the repurchase of up to 50,000 shares, or

approximately 2.5% of the Company’s then issued and outstanding shares of common stock, and announced the fifth repurchase program on Form 8-K filed on December 13,

2018. The repurchase program does not have an expiration date.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS

	No.		Description
	31.1		Rule 13a-14(d) and 15d-14(d) Certification of the Chief Executive Officer.
	31.2		Rule 13a-14(d) and 15d-14(d) Certification of the Chief Financial Officer.
	32.0		Section 1350 Certification.
	101.INS		Inline XBRL Instance Document.
	101.SCH		Inline XBRL Taxonomy Extension Schema Document.
	101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definitions Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
	~~101.DEF~~104		~~Inline XBRL Taxonomy Extension Definitions Linkbase Document.~~
	~~104~~		Cover Page Interactive Data File ~~(embedded within the Inline~~(formatted as inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August ~~13, 2021~~12, 2022	By:	/s/Robert T. Strong
		Robert T. Strong
		President and Chief Executive Officer


		/s/John J. Augustine
Date: August ~~13, 2021~~12, 2022	By:	~~/s/ John J. Augustine~~
		John J. Augustine Executive Vice President and Chief Financial Officer

Pennsylvania		35-2293957
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

501 Knowles Avenue, Southampton, Pennsylvania		18966
(Address of Principal Executive Offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	~~Non-accelerated filer~~ ☒	☒	Smaller reporting company	☒
		Emerging growth company	☐

PART I - FINANCIAL INFORMATION		Page

Item 1 -	Financial Statements

	Consolidated Balance Sheets as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (Unaudited)	1

	Consolidated Statements of Income for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	2

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	34

	Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	45

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2021~~2022 and ~~2020~~2021 (Unaudited)	68

	Notes to the Unaudited Consolidated Financial Statements	810

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3536

Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	4849

Item 4 -	Controls and Procedures	4849

PART II - OTHER INFORMATION

Item 1 -	Legal Proceedings	4849

Item 1A -	Risk Factors	48 50

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3 -	Defaults Upon Senior Securities	50

Item 4 -	Mine Safety Disclosures	5051

Item 5 -	Other Information	5051

Item 6 -	Exhibits	51

SIGNATURES

	At June 30,			At December 31,
	2021			2020
	(In thousands, except share data)
Assets
Due from banks, non-interest-bearing	$	454		$	205
Due from banks, interest-bearing		18,485			33,708
Cash and cash equivalents		18,939			33,913
Investment in interest-earning time deposits		7,979			9,463
Investment securities available for sale		4,581			10,725
Loans held for sale		99,383			53,191
Loans receivable, net of allowance for loan losses (2021 $3,746; 2020 $3,061)		376,339			359,122
Accrued interest receivable		3,358			3,054
Investment in Federal Home Loan Bank stock, at cost		1,578			1,665
Bank-owned life insurance		4,094			4,054
Premises and equipment, net		2,412			2,341
Goodwill		3,107			515
Other intangible, net of accumulated amortization		247			271
Other real estate owned, net		342			286
Prepaid expenses and other assets		4,617			5,475
Total Assets	$	526,976		$	484,075
Liabilities and Stockholders’ Equity
Liabilities
Deposits:
Non-interest bearing	$	74,010		$	54,202
Interest-bearing		351,519			300,643
Total deposits		425,529			354,845
Federal Home Loan Bank short-term borrowings		10,000			10,000
Federal Home Loan Bank long-term borrowings		24,193			28,193
Federal Reserve Bank long-term borrowings		17,867			48,134
Subordinated debt		7,916			7,899
Other short-term borrowings		1,209			0
Accrued interest payable		392			362
Advances from borrowers for taxes and insurance		2,435			2,486
Accrued expenses and other liabilities		4,234			3,428
Total Liabilities		493,775			455,347
Stockholders’ Equity
Preferred stock – $0.01 par value, 1,000,000 shares authorized; none issued or outstanding		0			0
Common stock – $0.01 par value; 9,000,000 shares authorized; 2,777,250 issued; 2,004,015 and 1,986,528 outstanding at June 30, 2021 and December 31, 2020, respectively		28			28
Additional paid-in capital		15,457			15,282
Treasury stock, at cost: 773,235 and 790,722 shares at June 30, 2021 and December 31, 2020, respectively		(5,022	)		(5,114	)
Unallocated common stock held by Employee Stock Ownership Plan (ESOP)		(17	)		(51	)
Accumulated other comprehensive income		34			118
Retained earnings		20,606			18,465
Total Quaint Oak Bancorp, Inc. Stockholders' Equity		31,086			28,728
Noncontrolling Interest		2,115			0
Total Stockholders' Equity	$	33,201		$	28,728
Total Liabilities and Stockholders’ Equity	$	526,976		$	484,075

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(In thousands, except for share data)
Interest Income
Interest on loans, including fees	$	5,735		$	3,891		$	10,478		$	7,363
Interest and dividends on time deposits, investment securities, interest-bearing deposits with others, and Federal Home Loan Bank stock		108			142			254			341
Total Interest Income		5,843			4,033			10,732			7,704

Interest Expense
Interest on deposits		792			1,069			1,668			2,190
Interest on Federal Home Loan Bank short-term borrowings		0			1			6			31
Interest on Federal Home Loan Bank long-term borrowings		129			153			268			300
Interest on Federal Reserve Bank long-term borrowings		29			23			69			23
Interest on subordinated debt		130			130			260			260
Interest on other short-term borrowings		26			0			96			0
Total Interest Expense		1,106			1,376			2,367			2,804
Net Interest Income		4,737			2,657			8,365			4,900
Provision for Loan Losses		448			305			702			420
Net Interest Income after Provision for Loan Losses		4,289			2,352			7,663			4,480

Non-Interest Income
Mortgage banking, equipment lending and title abstract fees		522			351			1,053			645
Real estate sales commissions, net		33			30			64			63
Insurance commissions		133			120			240			217
Other fees and services charges		51			(49	)		173			34
Loan servicing income		328			0			551			0
Income from bank-owned life insurance		21			20			40			39
Net gain on loans held for sale		1,335			826			2,550			1,607
Net gain on sales of other real estate owned		0			18			0			18
Gain on the sale of SBA loans		66			52			267			52
Gain on the sale of investment securities available for sale		45			0			362			0
Total Non-Interest Income		2,534			1,368			5,300			2,675

Non-Interest Expense
Salaries and employee benefits		3,439			1,784			6,839			3,763
Directors' fees and expenses		60			52			128			114
Occupancy and equipment		387			218			764			423
Data processing		202			160			407			297
Professional fees		218			113			381			227
FDIC deposit insurance assessment		73			27			124			47
Other real estate owned expenses		3			8			12			22
Advertising		122			75			227			150
Amortization of other intangible		12			12			24			24
Other		319			246			648			455
Total Non-Interest Expense		4,835			2,695			9,554			5,522
Income before Income Taxes	$	1,988		$	1,025		$	3,409		$	1,633
Income Taxes		567			294			991			470
Net Income	$	1,421		$	731		$	2,418		$	1,163
Net Loss Attributable to Noncontrolling Interest	$	(88	)	$	0		$	(121	)	$	0
Net Income Attributable to Quaint Oak Bancorp, Inc.	$	1,509		$	731		$	2,539		$	1,163

Earnings per share - basic	$	0.76		$	0.37		$	1.28		$	0.59
Average shares outstanding - basic		1,991,617			1,978,421			1,985,844			1,971,276
Earnings per share - diluted	$	0.72		$	0.36		$	1.22		$	0.58
Average shares outstanding - diluted		2,091,490			2,003,159			2,078,980			2,011,843

*~~Quaint Oak Bancorp, Inc.~~*
~~Consolidated Statements of Comprehensive~~ ~~Income (Unaudited)~~

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(In thousands)
Net Income	$	2,295		$	1,421		$	5,560		$	2,418

Other Comprehensive Income (Loss):
Unrealized gains (losses) on investment securities available-for-sale		(26	)		13			(53	)		257
Income tax effect		6			(3	)		12			(55	)
Reclassification adjustment for gain on sale of investment securities included in net income		0			(45	)		0			(362	)
Income tax effect		0			9			0			76
Other comprehensive loss		(20	)		(26	)		(41	)		(84	)

Total Comprehensive Income	$	2,275		$	1,395		$	5,519		$	2,334
Comprehensive Income (Loss) Attributable to Noncontrolling Interest	$	525		$	(88	)	$	1,541		$	(121	)
Comprehensive Income Attributable to Quaint Oak Bancorp, Inc.	$	1,750		$	1,483		$	3,978		$	2,455

	Common Stock											Accumulated
	Number of					Additional						Other									Total
	Shares					Paid-in			Treasury			Comprehensive			Retained			Noncontrolling			Stockholders'
	Outstanding			Amount		Capital			Stock			Income (Loss)			Earnings			Interest			Equity
	(In thousands, except share and per share data)
BALANCE - MARCH 31, 2022	2,016,517		$	28	$	15,813		$	(4,955	)	$	2		$	26,057		$	3,019		$	39,964

Common stock allocated by ESOP (4,000 shares)	4,000					59			25												84

Treasury stock purchase	(571	)							(14	)											(14	)

Reissuance of treasury stock under stock incentive plan	9,123					(57	)		57												-

Reissuance of treasury stock under 401(k) Plan	652					11			4												15

Reissuance of treasury stock for exercised stock options	16,000					36			99												135

Stock based compensation expense						42															42

Cash dividends declared ($0.13 per share)															(263	)					(263	)

Noncontrolling interest member distribution																		(59	)		(59	)

Net income															1,770			525			2,295

Other comprehensive loss, net												(20	)								(20	)
BALANCE – JUNE 30, 2022	2,045,721		$	28	$	15,904		$	(4,784	)	$	(18	)	$	27,564		$	3,485		$	42,179

												Unallocated
	Common Stock											Common			Accumulated
	*Number of*					*Additional*						*Stock Held*			*Other*									*Total*
	*Shares*					*Paid-in*			*Treasury*			*by Benefit*			*Comprehensive*			*Retained*			*Noncontrolling*			*Stockholders'*
	*Outstanding*			*Amount*		*Capital*			*Stock*			*Plans*			*Income (Loss)*			*Earnings*			*Interest*			*Equity*
	(In thousands, except share and per share data)
BALANCE - MARCH 31, 2021	1,989,483		$	28	$	15,382		$	(5,099	)	$	(33	)	$	60		$	19,316		$	2,203		$	31,857

Common Stock allocated
by ESOP (3,607) shares)						47						16												63

Treasury stock purchase	(1,122	)							(20	)														(20	)

Reissuance of treasury stock under 401(k) Plan	733					9			4															13

Reissuance of treasury stock under stock incentive plan	9,421					(58	)		58															-

Reissuance of treasury stock for exercised stock options	5,500					36			35															71

Stock based compensation expense						41																		41

Cash dividends declared ($0.11 per share)																		(219	)					(219	)

Net income																		1,509			(88	)		1,421

Other comprehensive loss, net															(26	)								(26	)
BALANCE – JUNE 30, 2021	2,004,015		$	28	$	15,457		$	(5,022	)	$	(17	)	$	34		$	20,606		$	2,115		$	33,201

												Unallocated
	Common Stock											Common			Accumulated
	Number of Shares Outstanding			Amount		Additional Paid-in Capital			Treasury Stock			Stock Held by Benefit Plans			Other Comprehensive Income			Retained Earnings			Noncontrolling Interest			Total Stockholders’ Equity
				(In thousands, except share data)
BALANCE – MARCH 31, 2021		1,989,483		$	28	$	15,382		$	(5,099	)	$	(33	)	$	60		$	19,316		$	2,203		$	31,857

Common stock allocated by ESOP (3,607 shares)					0		47			0			16			0			0			0			63

Treasury stock purchase		(1,122	)		0		0			(20	)		0			0			0			0			(20	)

Reissuance of treasury stock under 401(k) Plan		733			0		9			4			0			0			0			0			13

Reissuance of treasury stock under stock incentive plan		9,421			0		(58	)		58			0			0			0			0			0

Reissuance of treasury stock for exercised stock options		5,500			0		36			35			0			0			0			0			71

Stock based compensation expense					0		41			0			0			0			0			0			41

Net loss attributable to noncontrolling interest					0		0			0			0			0			0			(88	)		(88	)

Cash dividends declared ($0.11 per share)					0		0			0			0			0			(219	)		0			(219	)

Net income attributable to Quaint Oak Bancorp, Inc.					0		0			0			0			0			1,509			0			1,509

Other comprehensive loss, net					0		0			0			0			(26	)		0			0			(26	)

BALANCE – JUNE 30, 2021		2,004,015		$	28	$	15,457		$	(5,022	)	$	(17	)	$	34		$	20,606		$	2,115		$	33,201

	For the Six Months
	Ended June 30,
	2022			2021
	(In Thousands)
Cash Flows from Operating Activities
Net income	$	5,560		$	2,418
Adjustments to reconcile net income to net cash used in operating activities:
Provision for loan losses		1,278			702
Depreciation of premises and equipment		177			148
Amortization of operating right-of-use assets		111			80
Amortization of subordinated debt issuance costs		16			17
Amortization of other intangible		24			24
Net amortization of securities premiums		0			6
Accretion of deferred loan fees and costs, net		(296	)		(2,196	)
Stock-based compensation expense		259			206
Gain on the sale of investment securities available for sale		0			(362	)
Net gain on loans held for sale		(7,068	)		(2,550	)
Loans held for sale-originations		(247,162	)		(157,831	)
Loans held for sale-proceeds		271,726			125,103
Gain on the sale of SBA loans		(167	)		(267	)
Increase in the cash surrender value of bank-owned life insurance		(42	)		(40	)
Changes in assets and liabilities which provided (used) cash:
Accrued interest receivable		(515	)		(304	)
Prepaid expenses and other assets		(1,395	)		1,493
Accrued interest payable		254			(44	)
Accrued expenses and other liabilities		2,262			136
Net Cash Provided by (Used in) Operating Activities		25,022			(33,261	)
Cash Flows from Investing Activities
Purchase of interest-earning time deposits		(1,840	)		(294	)
Redemption of interest-earning time deposits		1,553			1,778
Principal repayments on investment securities available for sale		0			532
Proceeds from the sale of investment securities available for sale		527			5,862
Net increase in loans receivable		(144,275	)		(17,082	)
Purchase of Federal Home Loan Bank stock		(5,652	)		(473	)
Redemption of Federal Home Loan Bank stock		3,630			560
Acquisition, net of cash acquired		0			1,259
Capitalized expenditures on other real estate owned		0			(56	)
Purchase of premises and equipment		(277	)		(182	)
Net Cash Used in Investing Activities		(146,334	)		(8,096	)
Cash Flows from Financing Activities
Net increase in demand deposits, money markets, and savings accounts		135,828			104,399
Net increase (decrease) in certificate accounts		6,771			(33,715	)
Increase (decrease) in advances from borrowers for taxes and insurance		1,300			(51	)
Repayments of Federal Home Loan Bank short-term borrowings		(89,300	)		(10,000	)
Proceeds from Federal Home Loan Bank short-term borrowings		63,300			10,000
Repayments of Federal Home Loan Bank long-term borrowings		(4,000	)		(4,000	)
Proceeds from Federal Home Loan Bank long-term borrowings		80,000			0
Repayments of Federal Reserve Bank long-term borrowings		(3,895	)		(30,267	)
Repayments of other borrowings		0			(9,680	)
Dividends paid		(485	)		(398	)
Noncontrolling interest capital distribution		(176	)		0
Purchase of treasury stock		(28	)		(25	)
Proceeds from the reissuance of treasury stock		33			33
Proceeds from the exercise of stock options		148			87
Net Cash Provided by Financing Activities		189,496			26,383
Net Increase (Decrease) in Cash and Cash Equivalents		68,184			(14,974	)
Cash and Cash Equivalents – Beginning of Year		10,705			33,913
Cash and Cash Equivalents – End of Year	$	78,889		$	18,939

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021
Net Income Attributable to Quaint Oak Bancorp, Inc.	$	1,509,000	$	731,000	$	2,539,000	$	1,163,000	$	1,770,000	$	1,509,000	$	4,019,000	$	2,539,000

Weighted average shares outstanding – basic		1,991,617		1,978,421		1,985,844		1,971,276		2,038,479		1,991,617		2,023,511		1,985,844
Effect of dilutive common stock equivalents		99,874		24,738		93,136		40,567		122,797		99,874		118,658		93,136
Adjusted weighted average shares outstanding – diluted		2,091,490		2,003,159		2,078,980		2,011,843		2,161,277		2,091,490		2,142,169		2,078,980

Basic earnings per share	$	0.76	$	0.37	$	1.28	$	0.59	$	0.87	$	0.76	$	1.99	$	1.28
Diluted earnings per share	$	0.72	$	0.36	$	1.22	$	0.58	$	0.82	$	0.72	$	1.88	$	1.22

	Unrealized Gains (Losses) on Investment Securities Available for Sale⁽¹⁾												Unrealized Gains (Losses) on Investment Securities Available for Sale (1)
	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Balance at the beginning of the period	$	60		$	(4	)	$	118		$	20		$	2		$	60		$	23		$	118
Other comprehensive income (loss) before classifications		10			10			202			(14	)		(20	)		10			(41	)		202
Amount reclassified from accumulated other comprehensive income (loss)		(36	)		0			(286	)		0			-			(36	)		-			(286	)
Total other comprehensive income (loss)		(26	)		10			(84	)		(14	)		(20	)		(26	)		(41	)		(84	)
Balance at the end of the period	$	34		$	6		$	34		$	6		$	(18	)	$	34		$	(18	)	$	34

Details About Other Comprehensive Loss	Amount Reclassified from Accumulated Other Comprehensive Loss ⁽¹⁾										Affected Line Item in the Statement of Income	Amount Reclassified from Accumulated Other Comprehensive (Loss) Income (1)										Affected Line Item in the Statement of Income
	For the Three Months Ended June 30,					For the Six Months Ended June 30,						For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2021			2020		2021			2020			2022		2021			2022		2021
Unrealized losses on investment securities available for sale	$	45		$	0	$	362		$	0	Loss on sales of investment securities	$	--	$	45		$	--	$	362		Gain on sales of investment securities available for sale
		(9	)		0		(76	)		0	Income taxes		-		(9	)		-		(76	)	Income taxes
	$	36		$	0	$	286		$	0		$	-	$	36		$	-	$	286

	June 30, 2021		December 31, 2020		June 30, 2022		December 31, 2021
Due in one year or less	$	3,780	$	4,006	$	5,768	$	4,487
Due after one year through five years		4,199		5,457		2,443		3,437
Total	$	7,979	$	9,463	$	8,211	$	7,924

	June 30, 2021									June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Available for Sale:
Mortgage-backed securities:
Government National Mortgage Association securities	$	4,369	$	37	$	(1	)	$	4,405	$	3,359	$	0	$	(26	)	$	3,333
Federal National Mortgage Association securities		169		7		0			176		118		4		0			122
Total mortgage-backed securities		4,538		44		(1	)		4,581

Total available-for-sale-securities	$	4,538	$	44	$	(1	)	$	4,581	$	3,477	$	4	$	(26	)	$	3,455

	Available for Sale				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due after five years through ten years	$	0	$	0	$	0	$	0
Due after ten years	$	4,538	$	4,581	$	3,477	$	3,455
Total	$	4,538	$	4,581	$	3,477	$	3,455

	June 30, 2021
			Less than Twelve Months					Twelve Months or Greater				Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Government National Mortgage Association securities		1	$	624	$	(1	)	$	0	$	0	$	624	$	(1	)

	June 30, 2021										June 30, 2022
	Pass		Special Mention		Substandard		Doubtful		Total		Pass		Special Mention		Substandard		Doubtful		Total
One-to-four family residential owner occupied	$	9,111	$	415	$	0	$	0	$	9,526	$	15,652	$	0	$	0	$	0	$	15,652
One-to-four family residential non-owner occupied		40,621		0		303		0		40,924		39,376		0		9		0		39,385
Multi-family residential		23,030		0		0		0		23,030		41,817		0		1,723		0		43,540
Commercial real estate		134,518		2,365		0		0		136,883		296,572		0		1,768		0		298,340
Construction		13,548		0		0		0		13,548		25,695		0		0		0		25,695
Home equity		4,275		0		0		0		4,275		4,883		0		0		0		4,883
Commercial business		153,015		3,797		0		0		156,812		126,005		0		2,234		0		128,239
Other consumer		15		0		0		0		15		4		0		0		0		4
Total	$	378,133	$	6,577	$	303	$	0	$	385,013	$	550,004	$	0	$	5,734	$	0	$	555,738

	June 30, 2021										June 30, 2022
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
One-to-four family residential owner occupied	$	0	$	0	$	-	$	122	$	0	$	0	$	0	$	-	$	0	$	-
One-to-four family residential non-owner occupied		9		9		-		9		0		9		9		-		9		-
Multi-family residential		0		0		-		0		0		1,723		1,723		-		1,723		0
Commercial real estate		131		131		-		131		6		131		131		-		131		6
Construction		0		0		-		0		0		0		0		-		0		-
Home equity		0		0		-		0		0		0		0		-		0		-
Commercial business		0		0		-		33		0		0		0		-		0		-
Other consumer		0		0		-		0		0		0		0		-		0		-
								-										-
With an allowance recorded:
One-to-four family residential owner occupied	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	-	$	0	$	-
One-to-four family residential non-owner occupied		0		0		0		0		0		0		0		-		0		-
Multi-family residential		0		0		0		0		0		0		0		-		0		-
Commercial real estate		0		0		0		0		0		0		0		-		0		-
Construction		0		0		0		0		0		0		0		-		-		-
Home equity		0		0		0		0		0		0		0		-		-		-
Commercial business		0		0		0		0		0		0		0		-		-		-
Other consumer		0		0		0		0		0		0		0		-		-		-

Total:
One-to-four family residential owner occupied	$	0	$	0	$	0	$	122	$	0	$	0	$	0	$	-	$	0	$	-
One-to-four family residential non-owner occupied		9		9		0		9		0		9		9		-		9		-
Multi-family residential		0		0		0		0		0		1,723		1,723		-		1,723		0
Commercial real estate		131		131		0		131		6		131		131		-		131		6
Construction		0		0		0		0		0		0		0		-		-		-
Home equity		0		0		0		0		0		0		0		-		-		-
Commercial business		0		0		0		33		0		0		0		-		0		-
Other consumer		0		0		0		0		0		0		0		-		-		-
Total	$	140	$	140	$	0	$	295	$	6	$	1,863	$	1,863	$	-	$	1,863	$	6

	June 30, 2021										June 30, 2022
	Number of Contracts		Recorded Investment		Non- Accrual		Accruing		Related Allowance		Number of Contracts		Recorded Investment		Non- Accrual		Accruing		Related Allowance
One-to-four family residential owner occupied		0	$	0	$	0	$	0	$	0		0	$	0	$	0	$	0	$	0
One-to-four family residential non-owner occupied		1		9		9		0		0		1		9		9		0		0
Multi-family residential		0		0		0		0		0		0		0		0		0		0
Commercial real estate		1		131		0		131		0		1		131		0		131		0
Construction		0		0		0		0		0		0		0		0		0		0
Home equity		0		0		0		0		0		0		0		0		0		0
Commercial business		0		0		0		0		0		0		0		0		0		0
Other consumer		0		0		0		0		0		0		0		0		0		0
Total		2	$	140	$	9	$	131	$	0		2	$	140	$	9	$	131	$	0

	June 30, 2021											June 30, 2022
	Current		Past Due 30-89 Days		90 Days or More Past Due		Non- Accrual		Total			Current		Past Due 30-89 Days		90 Days or More Past Due		Non- Accrual		Total
One-to-four family residential owner occupied	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
One-to-four family residential non-owner occupied		0		0		0		9		9		0		0		0		9		9
Multi-family residential		0		0		0		0		0		0		0		0		0		0
Commercial real estate		131		0		0		0		131		131		0		0		0		131
Construction		0		0		0		0		0		0		0		0		0		0
Home equity		0		0		0		0		0		0		0		0		0		0
Commercial business		0		0		0		0		0		0		0		0		0		0
Other consumer		0		0		0		0		0		0		0		0		0		0
Total	$	131	$	0	$	0	$	9	$	140	$	131	$	0	$	0	$	9	$	140

	December 31, 2020												December 31, 2021
	Current		Past Due 30-89 Days		90 Days or More Past Due			Non- Accrual		Total			Current		Past Due 30-89 Days		90 Days or More Past Due		Non- Accrual		Total
One-to-four family residential owner occupied	$	0	$	0	$	0		$	0	$	0	$	0	$	0	$	0	$	0	$	0
One-to-four family residential non-owner occupied		0		0		0			19		19		0		0		0		9		9
Multi-family residential		0		0		0			0		0		0		0		0		0		0
Commercial real estate		131		0		0	��		0		131		131		0		0		0		131
Construction		0		0		0			0		0		0		0		0		0		0
Home equity		0		0		0			0		0		0		0		0		0		0
Commercial business		0		0		0			0		0		0		0		0		0		0
Other consumer		0		0		0			0		0		0		0		0		0		0
Total	$	131	$	0	$	0		$	19	$	150	$	131	$	0	$	0	$	9	$	140

	June 30, 2022
	1-4 Family Residential Owner Occupied		1-4 Family Residential Non-Owner Occupied			Multi-Family Residential			Commercial Real Estate		Construction		Home Equity		Commercial Business and Other Consumer			Unallocated			Total
*For the Three Months Ended June 30, 2022*
*Allowance for loan losses:*
Beginning balance	$	99	$	305		$	464		$	2,637	$	132	$	28	$	1,876		$	400		$	5,941
Charge-offs		0		0			0			0		0		0		0			0			0
Recoveries		0		0			0			0		0		0		0			0			0
Provision		5		(29	)		(87	)		746		151		4		(141	)		(50	)		599
Ending balance	$	104	$	276		$	377		$	3,383	$	283	$	32	$	1,735		$	350		$	6,540

*For the Six Months Ended June 30, 2022*
*Allowance for loan losses:*
Beginning balance	$	73	$	292		$	249		$	2,475	$	119	$	29	$	1,625		$	400		$	5,262
Charge-offs		0		0			0			0		0		0		0			0			0
Recoveries		0		0			0			0		0		0		0			0			0
Provision		31		(16	)		128			908		164		3		110			(50	)		1,278
Ending balance	$	104	$	276		$	377		$	3,383	$	283	$	32	$	1,735		$	350		$	6,540

*Ending balance evaluated*
*for impairment:*
Individually	$	0	$	0		$	0		$	0	$	0	$	0	$	0		$	0		$	0
Collectively	$	104	$	276		$	377		$	3,383	$	283	$	32	$	1,735		$	350		$	6,540

*Loans receivable:*
Ending balance:	$	15,652	$	39,385		$	43,540		$	298,340	$	25,695	$	4,883	$	128,243			0		$	555,738

*Ending balance evaluated*
for impairment:
Individually	$	0	$	9		$	1,723		$	131	$	0	$	0	$	0					$	1,863
Collectively	$	15,652	$	39,376		$	41,817		$	298,209	$	25,695	$	4,883	$	128,243					$	553,875

	June 30, 2020
	1-4 Family Residential Owner Occupied			1-4 Family Residential Non-Owner Occupied		Multi-Family Residential			Commercial Real Estate		Construction			Home Equity			Commercial Business and Other Consumer		Unallocated		Total
For the Three Months Ended June 30, 2020 Allowance for loan losses:
Beginning balance	$	47		$	307	$	217		$	944	$	168		$	26		$	537	$	100	$	2,346
Charge-offs		0			0		0			0		0			0			0		0		0
Recoveries		0			0		0			0		0			0			0		0		0
Provision		(4	)		92		(13	)		285		(54	)		(1	)		0		0		305
Ending balance	$	43		$	399	$	204		$	1,229	$	114		$	25		$	537	$	100	$	2,651

For the Six Months Ended June 30, 2020 Allowance for loan losses:
Beginning balance	$	52		$	351	$	145		$	854	$	250		$	19		$	500	$	60	$	2,231
Charge-offs		0			0		0			0		0			0			0		0		0
Recoveries		0			0		0			0		0			0			0		0		0
Provision		(9	)		48		59			375		(136	)		6			37		40		420
Ending balance	$	43		$	399	$	204		$	1,229	$	114		$	25		$	537	$	100	$	2,651

Ending balance evaluated for impairment:
Individually	$	0		$	0	$	0		$	3	$	0		$	0		$	0	$	0	$	3
Collectively	$	43		$	399	$	204		$	1,226	$	114		$	25		$	537	$	100	$	2,648

	June 30, 2022
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable 90 Days or More Past Due and Accruing
One-to-four family residential owner occupied	$	411	$	0	$	411	$	15,241	$	15,652	$	0
One-to-four family residential non-owner occupied		40		9		49		39,336		39,385		0
Multi-family residential		0		1,723		1,723		41,817		43,540		0
Commercial real estate		1,384		0		1,384		296,956		298,340		0
Construction		0		0		0		25,695		25,695		0
Home equity		54		0		54		4,829		4,883		0
Commercial business		169		0		169		128,070		128,239		0
Other consumer		0		0		0		4		4		0
Total	$	2,058	$	1,732	$	3,790	$	551,948	$	555,738	$	0

	*December 31, 2021*
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		*Current*		Total Loans Receivable		Loans Receivable 90 Days or More Past Due and Accruing
One-to-four family residential owner occupied	$	809	$	0	$	809	$	8,970	$	9,779	$	-
One-to-four family residential non-owner occupied		285		9		294		38,458		38,752		-
Multi-family residential		-		-		-		29,344		29,344		-
Commercial real estate		-		-		-		183,822		183,822		-
Construction		-		-		-		15,843		15,843		-
Home equity		-		-		-		4,706		4,706		-
Commercial business		367		-		367		129,241		129,608		-
Other consumer		-		-		-		12		12		-
Total	$	1,461	$	9	$	1,470	$	410,396	$	411,866	$	-

	December 31, 2020
	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable 90 Days or More Past Due and Accruing

One-to-four family residential owner occupied	$	822	$	171	$	993	$	6,535	$	7,528	$	0
One-to-four family residential non-owner occupied		189		66		255		38,629		38,884		66
Multi-family residential		1,947		0		1,947		22,096		24,043		0
Commercial real estate		569		387		956		130,864		131,820		387
Construction		1,783		0		1,783		2,992		4,775		0
Home equity		0		0		0		3,788		3,788		0
Commercial business		574		0		574		153,813		154,387		0
Other consumer		0		0		0		17		17		0
Total	$	5,884	$	624	$	6,508	$	358,734	$	365,242	$	453

	2021							2020
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding at the beginning of the period		240,636		$	10.98		5.2		256,336		$	10.87		6.0
Granted		0			0		-		0			0		-
Exercised		(7,500	)		11.57		-		(12,500	)		8.10		-
Forfeited		0			0		-		(3,200	)		8.10		-
Outstanding at end of period		233,136		$	10.96		4.7		240,636		$	10.94		5.7
Exercisable at end of period		180,081		$	10.28		5.6		161,054		$	9.84		5.0

~~Expected dividend yield~~	~~2.11~~	%
~~Risk-free interest rate~~	~~2.96~~	%
~~Expected life of options (in years)~~	~~6.5~~
~~Expected stock-price volatility~~	~~12.42~~	%

	2022							2021
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Outstanding at the beginning of the period		233,136		$	10.96		4.2		240,636		$	10.98		5.2
Granted		0			0		-		0			0		-
Exercised		(17,000	)		8.71		-		(7,500	)		11.57		-
Forfeited		(2,000	)		13.30		-		0			0		-
Outstanding at end of period		214,136		$	11.12		3.9		233,136		$	10.96		4.7
Exercisable at end of period		183,209		$	10.79		6.0		180,081		$	10.28		5.6

	June 30, 2021								June 30, 2022
	Fair Value Measurements Using:								Fair Value Measurements Using:
	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)		Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Recurring fair value measurements
Investment securities available for sale:
Recurring fair value measurements:
Investment securities available for sale
Government National Mortgage Association mortgage-backed securities	$	4,405	$	0	$	4,405	$	0	$	3,333	$	0	$	3,333	$	0
Federal National Mortgage Association mortgage- backed securities		176		0		176		0		122		0		122		0
Total investment securities available for sale	$	4,581	$	0	$	4,581	$	0	$	3,455	$	0	$	3,455	$	0
Total recurring fair value measurements	$	4,581	$	0	$	4,581	$	0	$	3,455	$	0	$	3,455	$	0

Nonrecurring fair value measurements
Impaired loans	$	140	$	0	$	0	$	140	$	1,863	$	0	$	0	$	1,863
Other Real Estate Owned		342		0		0		342
Total nonrecurring fair value measurements	$	482	$	0	$	0	$	482	$	1,863	$	0	$	0	$	1,863

	June 30, 2022
	Quantitative Information About Level 3 Fair Value Measurements
	Total Fair Value		Valuation Techniques	Unobservable Input	Range (Weighted Average)
Impaired loans	$	1,863	Appraisal of collateral (1)	Appraisal adjustments (2)		8%	(8%)